US stocks close higher as investors await inflation and earnings data

 

US stocks advanced last night as investors continued building on the new year’s early rally while awaiting economic data and corporate earnings coming later in the week.

The Dow Jones Industrial Average gained 0.56 per cent, the S&P 500 traded up 0.7 per cent, and the Nasdaq Composite led indexes for another day, adding 1 per cent. The Nasdaq has rallied in recent days as optimism over cooling inflation pushed investors to beaten-up technology stocks.

US sectors were mostly mixed and fairly bunched in Tuesday trading, with Communication Services and Consumer Discretionary leading the pack, up 1.3 per cent and 1.26 per cent respectively, whilst Consumer Staples was the worst performer, closing 0.16 per cent lower. There were some positive takeaways from retail and consumer updates. FANMAGs and semis extended their recent gains. Travel and leisure also rallied despite some cautious commentary on cruise lines. The commodity space was mixed, with metals and mining stronger, but ag and commodity chemicals trailed, while Energy rallied in the afternoon, reversing earlier declines.

Billionaire investor Paul Tudor Jones was optimistic on the stock market overnight, saying the Federal Reserve likely would not break the economy, halting rate hikes before it does so. Jones, who noted he wasn’t making a specific forecast, said there was huge demand for stocks on the way this year due to share repurchases and mergers.

“You’ve probably got something just under a trillion dollars of excess demand in U.S. stocks,” Jones said Tuesday. “Where is the selling going to come to offset that demand coming from buybacks, from the corporate line items, from some combination of buybacks and M&A? That’s a significant amount. Everything being the same, the stock market would be up 7 per cent or 8 per cent this year.”

Oil

Oil markets have been relatively calm of late compared with the wild ride through much of 2022. Prices have been volatile but have mostly stayed at about $80 a barrel oil for the past couple months. Few see the calm lasting.

Wall Street’s top analysts see the makings of another price leap lurking in just about every important corner of the oil market. A run past $100 a barrel is likely in the coming months, they say, which would threaten a weak global economy and put energy prices back at the top of the agenda of many governments.

China

In other news, China's decision to allow imports of Australian coal after more than two years of an unofficial ban will see three utilities and a major steelmaker given permission to resume imports from Australia. There is likely to be some interest among Chinese buyers for cargoes from Australia but the possibility of a return to prior levels of trade is limited considering regional and global market dynamics have shifted substantially.

Company news

In company specific news, Johnson & Johnson will look for opportunities to merge with or acquire firms that add value to its focus areas of eye care, surgical robots, orthopaedics and cardiovascular products, the company's Chief Executive Officer Joaquin Duato said on Monday.

Microsoft is set to invest $10 billion in OpenAI as part of a funding round that would value the company at $29 billion, news site Semafor reported Tuesday. Microsoft will reportedly get a 75 per cent share of OpenAI’s profits until it makes back the money on its investment, after which the company would assume a 49 per cent stake in OpenAI. A bet on ChatGPT could help Microsoft boost its efforts in web search, a market dominated by Google.

Figures around the globe

European markets closed lower. Paris fell 0.55 cent, Frankfurt fell 0.12 per cent and London’s FTSE closed 0.39 per cent lower.

Asian markets were mixed. Tokyo’s Nikkei gained 0.78 per cent, Hong Kong’s Hang Seng fell 0.27 per cent and China’s Shanghai Composite closed 0.21 per cent lower.

Yesterday, the Australian sharemarket fell 0.28 per cent to close at 7,131.

Ex-dividends

There is one company set to trade without the right to a dividend.

Turners Automotive (ASX:TRA) is paying 4.55 cents 85 per cent franked.

Commodities and the dollar

Oil is trading 0.44 per cent higher at US75.07 a barrel.
Gold is trading 0.21 per cent higher at US$1,881.80 an ounce.
Silver is trading 0.57 per cent lower at US$23.74 an ounce.
Copper is trading 1.25 per cent higher at US$407.70 a pound.
Iron ore futures are pointing to a rise of 0.71 per cent.
One Australian dollar is buying 68.95 US cents.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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