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Market Snapshot: Dow ends higher in first session in February as U.S. stocks book third straight day of gains

All three major benchmarks ended higher Tuesday, booking a third straight day of gains after wobbling earlier in the session, as Wall Street closed out February’s first day of trade on a positive note following a rough January.

Investors weighed manufacturing and jobs data, while earnings from Exxon Mobil Corp. and other corporate heavyweights were in the spotlight.

How did stock indexes trade?

The Dow Jones Industrial Average DJIA, +0.78% rose 273.38 points, or 0.8%, to close at 35,405.24.
The S&P 500 SPX, +0.69% gained 30.99 points, or 0.7%, to end at 4,546.54.
The Nasdaq Composite COMP, +0.75% added 106.12 points, or 0.8%, to finish at 14,346.

Stocks climbed sharply on Monday, but still logged big January declines. The Dow suffered a 3.3% monthly decline, the biggest monthly fall since November 2021. The S&P 500 saw a 5.3% monthly drop, the biggest since March 2020, while the Nasdaq Composite dropped 9%, its biggest monthly drop since March 2020 and worst January performance since 2008.

What drove the markets?

Stocks closed higher Tuesday, despite some initial hesitancy by investors about extending Monday’s strong gains. The modest gains to kick off February come after a dismal January for all three major benchmarks, which were pulled lower by worries about the Federal Reserve’s plans to begin raising rates this year.

“As volatile as January was, we haven’t seen anything yet,” said Sandi Bragar, chief client officer of Aspiriant, in a phone interview Tuesday. “Valuations are just so high still.”

Bragar said that she continues to favor a defensive positioning in equities, with a larger allocation for high-quality stocks that include Apple Inc. AAPL, -0.10% and other some Big Tech names. She told MarketWatch that she also likes consumer-product companies, some financial institutions and value stocks globally.

European markets gained on back of Wall Street’s rally Monday, while Chinese and some other Asian markets were closed for the Lunar New Year holiday.

In economic data, the Labor Department said job openings rose by 150,000 to 10.9 million on the last day of December, indicating the labor market remains tight. Economists surveyed by The Wall Street Journal had forecast a 10.5 million figure.

The closely followed Institute for Supply Management barometer of manufacturing activity slipped to a 14-month low of 57.6% in January as a torrent of omicron cases hit the U.S. economy and shortages of labor and supplies hindered production. Economists had forecast a decline to 57.7% from 58.8% in December. Any number above 50% signifies growth.

Investors, however, were more focused on the survey’s index of prices paid, which rose to 76.1% from 68.2% in December, triggering some renewed selling that took stocks to session lows, said Louis Ricci, head of trading at Emles Advisors, a New York money management firm.

That said, the reading isn’t likely to change the path of the Federal Reserve, which already signaled plans to potentially begin raising rates in March and otherwise, said Ricci, who argued stocks are on track to rise after January’s stumble.

Small-cap stocks have fallen into a bear market, with a more than 20% fall from record highs by the Russell 2000 RUT, +1.10%, which historically points to strong returns over the following 12 months, Ricci said, in a phone interview. Meanwhile, companies appear aggressive again on buybacks, with Exxon Mobil announcing a $10 billion buyback and Swiss banking giant UBS Group AG UBS, +9.27% UBSG, +8.04% committed to up to $5 billion in buybacks.

See: JPMorgan’s Kolanovic is again pounding the table for stocks—but one market is close to triggering an ominous signal

Beyond the “inflationary pressures” seen in the index of prices paid, Larry Adam, chief investment officer at Raymond James, said in a phone interview Tuesday that he saw “some silver linings” in the details of the latest ISM report on U.S. manufacturing activity. 

Backlogs are down in five of the past six months, while delivery times declined for a third straight month and new orders fell for a second consecutive month, according to Adam. Those may be “harbingers of inflation really starting to at least ebb as we progress into this year,” he said, as supply-chain constraints may be “unfreezing.” 

Adam told MarketWatch that he remains bullish on the S&P 500, maintaining a price target of 5,050 for the index this year.

“Investors continue to buy the dips almost everywhere this week, with market sentiment boosted by a strong earning season so far where most companies have beaten expectations,” said Pierre Veyret, technical analyst at ActivTrades, in a note to clients.

Read: You can still find a haven in tech stocks: These 20 offer the safety net of highly stable profit

“Technically speaking, most indexes have registered solid rebounds over major support zones and are now challenging key resistance levels. If cleared, these resistances could open the doors to an extended rally, potentially driving prices up to new record highs on the short to midterm basis,” he said.

Also see: Bears beware. Past corrections for the S&P 500 are only 15% on average, outside of recessions

Which companies were in focus?

AT&T Inc. T, -4.24% on Tuesday said it would spin off its interest in WarnerMedia following the unit’s merger with Discovery. AT&T also said its board approved an annual dividend of $1.11 a share, down from $2.08, to account for the Warner Bros. spinoff. AT&T shares fell 4.2%.
Tesla Inc. TSLA, -0.58% will recall 53,822 vehicles because of an issue with its “rolling stop” functionality. Shares slipped 0.6%.
Shares of United Parcel Service Inc. UPS, +14.08% surged 14.1% after the package delivery giant reported earnings and revenue well above expectations.
Exxon Mobil Corp. stock XOM, +6.41% rose 6.4% after the energy giant reported an earnings beat, though revenue fell short of consensus.
AMC Entertainment Holdings Inc. shares AMC, +4.98% climbed 5% after the cinema-chain operator offered fourth-quarter guidance, with revenue ahead of consensus, though a net-loss range bigger than expected.
Sirius XM Holdings Inc. stock SIRI, +6.29% jumped 6.3% after the satellite radio company topped profit and revenue expectations, and provided an upbeat outlook, along with declaring a special dividend.

How did other assets fare?

The yield on the 10-year Treasury note  TMUBMUSD10Y, 1.792%  rose nearly 2 basis points to 1.799%. Yields and debt prices move opposite each other.
The ICE U.S. Dollar Index  DXY, -0.28%, a measure of the currency against a basket of six major rivals, was down 0.3%.
West Texas Intermediate crude for March delivery  CLH22, +0.24%  edged up nearly 0.1%, to settle at $88.20 a barrel. Gold’s April futures contract GCJ22, +0.27%  rose 0.3% to settle at $1,801.50 an ounce.
Bitcoin  BTCUSD, -0.09%  was trading up 0.9%, just shy of $38,800.
In European equities, the Stoxx Europe 600  SXXP, +1.28%  closed 1.3% higher, while London’s FTSE 100 UKX UKX, +0.96%  gained 1%.
The Nikkei 225 NIK NIK, +0.28%  finished up 0.3%. Markets in China and in other parts of Asia are closed for Lunar New Year.

—Barbara Kollmeyer contributed to this article.

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