US stocks end higher after choppy trading session

U.S. stocks rose on Tuesday after a late afternoon rally helped indices post a three-day winning streak.

All three major indices ended the day higher, shaking off the turmoil that largely defined the session. For most of the day, US stocks oscillated between tiny gains and losses before recovering solidly towards the final hour of trading.

The S&P 500 added 30.99 points, or 0.7%, to end at 4546.54. Its three-day percentage gain now stands at 5.1%, its largest since November 2020.

The Dow Jones Industrial Average advanced 273.38 points, or 0.8%, to end at 35,405.24. The tech-heavy Nasdaq Composite gained 106.12 points, or 0.7%, to close at 14346.00. Both indices also finished with their biggest three-day percentage gains since November 2020.

The US stock market’s recent winning streak comes after a rocky start to the year. On Monday, the S&P 500 closed January with a 5.3% loss, its largest since March 2020. The Nasdaq fell again, losing 9%.

Driving January’s sell-off was growing investor concern over the resilience of the US stock market in the face of tighter monetary policy. The Federal Reserve announced last week that it would begin raising rates in mid-March, prompting traders to reorganize their portfolios. Many dumped stocks of high-growth companies and turned to stocks and funds that seemed safer, such as dividend-paying stocks.

The start of a new month, however, brought new earnings reports and economic data for investors to analyze. Some investors say they hope last month’s volatility is, at least temporarily, behind them. Many still expect 2022 to be a choppy trading year as investors continually reassess their portfolios to account for the upcoming interest rate hike.

“We have relatively good economic conditions, in terms of well above normal GDP growth, a strong labor market and consumers and businesses with strong balance sheets,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. . “But you have these big headwinds from the Federal Reserve raising rates and cutting [its] balance sheet. I think investors are trying to decide what the right level is…to buy dips, but also to make sure they’re prepared for potential volatility down the road.

Mr. Zaccarelli said he currently prefers to reposition himself in higher quality companies with good profitability. He said he found opportunities in sectors such as finance and energy.

Fund managers say they are watching earnings closely for clues about how companies are handling inflation and supply chain issues. This week, some earnings reports showed strong results. Exxon Mobil gained $4.87, or 6.4%, to end at $80.83 after reporting 2021 profit of $23 billion, its highest total since 2014.

Shares of United Parcel Service rose $28.48, or 14%, to end at $230.69 – a new all-time closing high – after reporting an increase in quarterly profits. U.S.-listed shares of Swiss group UBS rose $1.73, or 9.3%, to close at $20.40 after the bank raised its financial targets and said it had the power fire to buy back up to $5 billion in stock this year.

“One of the themes this year was that earnings would be the main driver of the market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. Some 77% of S&P 500 companies that reported results before Tuesday’s close beat expectations for earnings per share, according to FactSet data.

The stock market has entered correction territory as investors reassess the value of the market after the Federal Reserve announced its intention to raise interest rates. The WSJ’s Dion Rabouin explains. Illustration: David Croc

Data released on Tuesday showed U.S. manufacturing activity slowed last month. The Institute for Supply Management’s manufacturing report of business PMI fell to 57.6 – a reading above 50 usually signals expansion – in January, from 58.8 in December. The report showed that the Covid-19 Omicron variant and supply chain hurdles were among the issues weighing on the business.

A separate report from the Labor Department said hiring and the number of worker quits slowed in December compared to the previous month.

Of the 11 sectors in the S&P 500, energy stocks posted the largest gain on Tuesday. Industrials, financials and materials groups were also among those that posted strong performances.

Megacap tech stocks, on the other hand, traded mixed. Microsoft lost $2.22, or 0.7%, to end at $308.76. Netflix jumped $29.99, or 7%, to end at $457.13. Tech companies suffered in January’s sell-off as rising interest rates threatened to weigh on their expensive valuations, which are based on long-term growth expectations.

“Tech has entered the year very, very expensive, making it all the more vulnerable to a rate hike,” said Seema Shah, chief strategist at Principal Global Investors. “It makes sense that there was this selloff, but for tech you have to be a long-term investor and think about future trends.”

In the bond market, the yield on the benchmark 10-year Treasury bill rose to 1.799% from 1.780% on Monday. Yields and bond prices move in opposite directions.

The Fearless Girl statue in front of the New York Stock Exchange.


Photo:

Spencer Platt/Getty Images

Overseas, the pancontinental Stoxx Europe 600 index rose 1.3%. In Asia, Chinese markets were closed. Japan’s Nikkei 225 gained 0.3%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Will Horner at william.horner@wsj.com

Corrections & Amplifications
Manufacturing activity in the United States slowed last month to its lowest level since November 2020, according to the Institute for Supply Management’s Business PMI Manufacturing Report. An earlier version of this article incorrectly stated that this was the lowest level since September 2020. (Corrected February 1.)

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