©Portal. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2022. Portal/Brendan McDermid
By Chuck Mikolajczak
(Portal) – US stocks rallied to close higher on Friday as the Dow and the Dow endured a three-day losing streak and the Nasdaq rose more than 2% as quarterly earnings helped boost Netflix while Google parent Alphabet (NASDAQ:) climbed thereafter to announce job cuts.
Netflix Inc (NASDAQ:) shares rose 8.46% as the streaming company added more-than-expected subscribers in the fourth quarter and said co-founder Reed Hastings would step down as CEO.
Netflix’s earnings report comes as tech and other growth-related sectors face hurdles on the US Federal Reserve’s rising interest rate path and recession concerns that have fueled the likes of Microsoft Corp (NASDAQ:) and Amazon.com Inc (NASDAQ:). ) laying off thousands of employees.
Alphabet Inc was the latest company to announce job cuts as it said it would cut 12,000 jobs, sending shares up 5.34%.
The gains pushed the communications services index up 3.96%, the top performer among the 11 major S&P 500 sectors, posting its largest one-day percentage gain since Nov. 30.
High-growth sectors like communications services were among the underperformers in 2022, and were significantly weaker in the final months of the year as investors were drawn to stocks with high dividend yields.
“Today’s action is probably due to the fact that we had three down days so it ended up being a bit oversold and they’re just a little bargain hunting today,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton. Florida.
“When people see an opportunity, when they get comfortable with the Fed’s narrative, investors start to believe that narrative and say, ‘Okay, that’s it, let’s look at the stocks that’ve really been beaten up’ because the market is a discounting mechanism.”
The index rose 330.93 points, or 1%, to 33,375.49, the S&P 500 gained 73.76 points, or 1.89%, to 3,972.61 and added 288.17 points, or 2.66%, to 11,140.43 added.
For the week, the Dow is down 2.7%, the S&P 500 is down 0.66% and the Nasdaq is down 0.55%.
Comments from Federal Reserve officials have largely said they expect interest rates to rise to at least 5% this year as the central bank continues to try to contain high inflation. On Friday, Fed Governor Christopher Waller said the central bank may be “reasonably close” to a point where interest rates are “enough restrictive” to cool inflation, giving stocks an extra boost.
The Fed is widely expected to hike rates by 25 basis points (bps) on its February 1st monetary policy announcement.
Still, concerns about corporate earnings remain as the US economy shows signs of slowing and a potential recession.
Analysts now expect full-year earnings for S&P 500 companies to decline 2.9% year over year, according to Refinitiv data for the fourth quarter, compared to a 1.6% decline earlier in the year.
However, gains in the Dow were dampened by a 2.54% decline in Goldman Sachs Group Inc (NYSE:) shares after the Wall Street Journal reported that the Fed was investigating the company’s consumer business.
Volume on US exchanges was 11.90 billion shares compared to the average of 10.87 billion for the entire session over the last 20 trading days.
Rising issues predominated on the NYSE at a 3.55 to 1 ratio; on the Nasdaq, a 2.63 to 1 ratio favored movers.
The S&P 500 posted a new 52-week high and four new lows; the Nasdaq Composite posted 77 new highs and 20 new lows.