Investing.com -- U.S. stocks gained Monday, with the tech-heavy Nasdaq leading the way ahead of earnings season and the release of crucial inflation data that could influence future Federal Reserve thinking over potential interest rate cuts.
The Dow Jones Industrial Average closed up 217 points, the S&P 500 traded up 66 points, or 1.4%, and the NASDAQ Composite traded up 320 points, or 2.2%.
NVIDIA Corporation (NASDAQ:NVDA) and other megacaps drove the upside action, benefiting from lower treasury yields. The AI chip giant gained over 6.4% as CES 2024 kicks off in Las Vegas and as analysts at New Street Research named it a top pick for 2024, despite last year's 200% gain. Elsewhere, Amazon.com Inc (NASDAQ:AMZN) gained 2.7%, Apple Inc (NASDAQ:AAPL) gained 2.4%, and Alphabet (NASDAQ:GOOGL) gained 2.3%
Today's action is a reversal from the disappointing start to the new year last week, with stocks posting their first losing week in 10 as investors reassessed the chances of early rate cuts by the U.S. central bank in 2024.
The blue-chip Dow Jones Industrial Average dropped 1.5% last week, the broad-based S&P 500 slid 0.6%, and the tech-heavy Nasdaq Composite posted its worst weekly performance since September, falling 3.3% as Treasury yields rose.
CPI release to offer rates clarity
Friday’s monthly U.S. jobs report came in stronger than expected, and coupled with the minutes from the last Fed meeting, has elevated uncertainty over what the U.S. central bank intends to do with interest rates early in the new year.
Dallas Fed boss Lorie Logan even warned on Saturday that rates could even be lifted again.
"If we don't maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up and reverse the progress we've made," she said. "In light of the easing in financial conditions in recent months, we shouldn't take the possibility of another rate increase off the table just yet."
Thursday’s U.S. inflation data could offer greater clarity, with U.S. CPI seen rising by 0.2% month-on-month, an annual increase of 3.2%.
The crucial core figure is rising by 0.2% month-on-month, dragging the annual pace down to 3.8%, a level not seen since mid-2021.
Atlanta Fed President Raphael Bostic is also due to speak later in Monday’s session, and his views will be studied carefully for his perspective on monetary policy easing.
Boeing slumps after 737 Max groundings
In the corporate sector, Boeing (NYSE:BA) stock fell 8% after the Federal Aviation Administration ordered the temporary grounding of around 171 Boeing jets in the wake of a mid-air breach of a 737 Max jet last week.
Additionally, Alaska Air (NYSE:ALK) stock slid almost 5% after the carrier canceled more than 200 flights following the FAA order, while fuelage manufacturer Spirit Aerosystems (NYSE:SPR) slumped 11%.
In M&A news, Johnson & Johnson (NYSE:JNJ) said on Monday it had agreed to buy drug developer Ambrx Biopharma (NASDAQ:AMAM) for $2 billion, while Merck (NYSE:MRK) announced plans to buy cancer drug developer Harpoon Therapeutics (NASDAQ:HARP) for about $680 million.
The latest quarterly earnings season starts on Friday, with results from big banks Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) due.
Crude slumps after Saudi Arabia cuts export prices
Oil prices fell Monday after Saudi Arabia slashed the prices of its Asian crude exports to over two-year lows, adding to the current narrative that global demand remains weak.
By 12:10 ET, the U.S. crude futures traded 4.8% lower at $70.22 a barrel, while the Brent contract dropped 4% to $75.58 a barrel.
Major crude exporter Saudi Arabia on Sunday cut the February official selling price of its flagship Arab Light crude to Asia to the lowest level in 27 months.
Yet, despite these worries over global economic activity, both benchmarks climbed more than 2% last week on rising geopolitical tensions in the Middle East following attacks by Yemeni Houthis on ships in the Red Sea, prompting disruptions in shipping activity in the region.
Additionally, gold futures initially fell more than 1% in early trading. It is now down 0.6% to $2,032.35/oz, while EUR/USD traded 0.3% higher at 1.0975.
(Oliver Gray contributed to this article.)