Dow jumps 300 points as battered tech sector rebounds

Wall Street ended sharply higher on Monday, powered by surging technology stocks as investors began an earnings-heavy week with a renewed enthusiasm for market leading momentum stocks that were battered last year.

The Dow Jones Industrial Average jumped 254.07 points, or 0.8%, to 33,629.56, the Nasdaq surged more than 200 points, or 2%, while the S&P 500 climbed 1.1%.

“(Chips are) a group that’s been depressed, so I’m not too surprised,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “We’re going to see earnings from these companies over the next couple of weeks and that will be where the rubber meets the road.”

“It’s a group that was ripe for a rebound.”

The session marks a calm before the storm in a week jam-packed with high profile earnings reports and back-end loaded with crucial economic data.

Investors are all but certain the Federal Reserve will implement a bite-sized interest rate hike next week even as the central bank remains committed to taming the hottest inflationary cycle in decades.

“(Investors) are pretty comfortable that they’re going to see lower rate hikes from the Fed, that we are rounding the corner on inflation and interest rate hikes,” Tuz added. “Stocks can do well in that environment, especially the big growth stocks that drive the market.”

Financial markets have priced in a 99.8% likelihood of a 25 basis point hike to the Fed funds target rate at the conclusion of its two-day monetary policy meeting next Wednesday, according to CME’s FedWatch tool. 

Analysts now see S&P 500 fourth-quarter earnings, on aggregate, dropping 3% year-on-year, nearly twice as steep as the 1.6% annual drop seen at the beginning of the year, per Refinitiv.

Investors are eyeing results from Microsoft, Tesla, IBM and Intel this week to see how their business are coping with the threat of an economic slowdown triggered by the Federal Reserve’s aggressive policy tightening.

Investors are also awaiting January manufacturing and fourth-quarter GDP data to assess the impact of the Fed’s rate hikes on the economy.

Although recent data has signaled cooling inflation, a tight labor market may keep the central bank on its aggressive policy tightening path until rates rise over 5%, a level backed by most policymakers.

Cloud-based software firm Salesforce rose 3% to lead gains among Dow components after activist investor Elliott Management made a multi-billion-dollar investment in the company, according to people familiar with the matter.