Wall Street closes up, regains ground as US inflation report nears

US stock market: U.S. stocks finished higher on Monday, regaining some of the ground lost last week, as investors added positions ahead of Thursday's highly awaited U.S. inflation report. The main stock indexes ended last week lower as investors took profits after months of gains due to worries over economic data, mixed earnings and rising Treasury yields. U.S. stocks have sharply rallied in 2023, with the benchmark S&P 500 (.SPX) rising 17.7 per cent this year, fueled by optimism around artificial intelligence and hopes of a soft landing for the world's largest economy.

"I think you've got enough people that might be looking to put some money to work, because they've really missed a lot of this rally, so that will limit any downside (from bouts of profit-taking)," said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers. He noted to expect some sideways trading in the near term, as profit-taking by investors who rode the rally balances out with those entering on any weakness.

While August trading is seasonally slower with summer vacations, set events and data releases can still offer investors new food for thought. On Thursday, the latest U.S. consumer price report is expected to offer clues about the Federal Reserve's monetary policy path, after Friday's employment report re-ignited fears that the central bank could keep rates higher for longer. New York Fed President John Williams, a voting member this year, said he expects interest rates could begin to slide in early 2024, as per a report, while Governor Michelle Bowman said additional interest rate hikes will likely be needed to lower inflation to the 2 per cent target.

The Dow Jones Industrial Average (.DJI) rose 407.51 points, or 1.16 per cent, to 35,473.13 - its largest one-day gain since June 15. Meanwhile, the S&P 500 (.SPX) gained 40.41 points, or 0.90 per cent, at 4,518.44, and the Nasdaq Composite (.IXIC) added 85.16 points, or 0.61 per cent, at 13,994.40. The tech-heavy Nasdaq snapped a four-session losing streak, matching its longest negative run this year. It overcame weakness in Tesla (TSLA.O), which dropped 0.9 per cent after the electric vehicle giant named Vaibhav Taneja to replace Zachary Kirkhorn as its finance chief.

The Nasdaq also finished lower for four straight days at the start of May. Before that, the longest losing streak was a six-session drop in October. The S&P 500 also snapped a four-session losing run. It has had two other such stretches in 2023: at the start of May and in February. It had a five-session skid in December. Most of the S&P's major indexes rose, led by gains of 1.9 per cent in communication services (.SPLRCL) and 1.4 per cent in financials (.SPSY).

Overall, second-quarter earnings have been better than expected so far, with 79.1 per cent of the 422 S&P 500 companies that have reported as of Friday beating analysts' estimates, Refinitiv data shows. Berkshire Hathaway(BRKa.N) rose 3.4 per cent to a record high, after the conglomerate run by billionaire investor Warren Buffett reported at the weekend that quarterly operating profit topped $10 billion for the first time.

However, Tyson Foods (TSN.N) slid 3.8 per cent after the meat packer disappointed Wall Street expectations for third-quarter revenue. Vaccine makers BioNTech SE and Moderna Inc (MRNA.O) slumped 7.5 per cent and 6.5 per cent, respectively. The former said it was cutting its drug development budget after quarterly revenue was hurt by a plunge in pandemic-related demand. The latter was hit by investment bank Leerink cutting its price target for the company.

Sage Therapeutics (SAGE.O) suffered its biggest one-day decline since December 2019, dropping 53.6 per cent, after the U.S. drug regulator declined to approve a first-of-its-kind postpartum depression (PPD) pill. Its partner on the drug, Biogen (BIIB.O), recovered to trade 0.9 per cent higher. Volume on U.S. exchanges was 9.92 billion shares, compared with the 10.86 billion average for the full session over the last 20 trading days. The S&P 500 posted 19 new 52-week highs and eight new lows; the Nasdaq Composite recorded 71 new highs and 169 new lows.