Googling the Dow

By Alex Eule |  Tuesday, February 1 New Month, New Market. After a volatile January, a new month has injected optimism into the market. Stocks closed near session highs, with the Dow Jones Industrial Average up 273 points, or 0.8% and the S&P 500 rising 0.7%. The Nasdaq Composite was up 0.75%. The rally capped an impressive stretch for the major indexes -- their best three days of trading since November 2020.  The sudden shift in sentiment is most likely an old-fashioned relief rally, though investors may also have found some comfort today in comments from multiple Federal Reserve members who pushed back on the idea of a half-point rate hike at the March Fed meeting. The chance of a 50-basis point increase had risen to 10% in recent days, up from almost no chance a month ago. (Trading in Fed futures still implies a 90% likelihood of a quarter-point rate boost in March.)  After overlooking the first batch of earnings reports, investors may also be coming around to generally solid numbers. Today, United Parcel Service soared 14% on strong fourth-quarter results. "The earnings beat was good, but that wasn’t the best part of the quarterly report," Barron's Al Root wrote today. "The logistics giant also raised its dividend and offered strong guidance for 2022. It’s a solid template for any company dealing with labor tightness, inflation, and supply-chain problems in 2022." Another wave of earnings could power the market tomorrow, including strong results tonight from key tech players Advanced Micro Devices and Alphabet.  One wrinkle could come from General Motors. The auto maker posted strong quarterly numbers, but gave what Al described as a "tepid outlook." Chip shortages continue to limit GM's ability to confidently forecast into the future. "We've expanded the [guidance] range over prior years, which I think is a reflection of the volatility that we've seen," CFO Paul Jacobson told investors on an earnings call tonight.  Still, after January's sudden selloff, investors may be starting to appreciate still-healthy numbers from Corporate America. Strategist Ed Yardeni titles his latest investor update: "Great-Looking Fundamentals." He notes that estimated profit margins for the next 12 months, or "forward profit margins," for the S&P 500 recently reached a record 13.3%. That's a sign, Yardeni writes, that supply-chain issues aren't depressing earnings or business activity.

 

DJIA: +0.78% to 35,405.24 S&P 500: +0.69% to 4,546.54 Nasdaq: +0.75% to 14,346.00 The Hot Stock: United Parcel Service +14.1% The Biggest Loser: AT&T -4.2% Best Sector: Energy +3.6% Worst Sector: Utilities -1.3%