Nasdaq up 2% on final day of volatile month

Jan 31 (Reuters) – The tech-heavy Nasdaq rose nearly 2% on Monday, but was still on track for its worst ever start to the year as investors shied away from stocks with lofty valuations amid aggressive rate hike bets and geopolitical tensions.

Valuations of growth and technology stocks have come under increasing scrutiny, with the Nasdaq (.IXIC) declining 10.4% so far this month.

Six of the 11 major S&P sectors advanced, led by a rise in technology (.SPLRCT) and consumer discretionary (.SPLRCD) stocks.

“Today’s and Friday’s bounce is just some of the institutional guys saying Nasdaq was due for end of the month rebalancing,” said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.

“It is simply a little bit of a relief rally after such a sharp sell-off.”

Tesla Inc (TSLA.O) jumped 8.9% after Credit Suisse raised the electric-car maker’s stock rating to “outperform”, while Netflix Inc surged 8.4% after Citigroup upgraded the streaming company’s shares to “buy”.

The bellwether S&P 500 (.SPX) has fallen 6.5% so far this month and is on track for its worst month since the pandemic-led crash in March 2020.

“The January barometer, which states ‘as goes January, so goes the year’, will be negative, implying investors are in for a challenging year,” Sam Stovall, chief investment strategist at CFRA Research, said.

The U.S. Federal Reserve last week signaled it intends to combat the four-decade high inflation by hiking key interest rates more aggressively than many market participants expected. read more

Fed funds futures traders are pricing in almost five rate increases by year-end, with some banks, such as the Bank of America now eyeing seven hikes this year. read more

Geopolitical tensions have added to market uncertainty, with the U.S. and its allies threatening Russia with new economic sanctions if it attacks Ukraine. read more

At 11:33 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 20.69 points, or 0.06%, at 34,746.16, the S&P 500 (.SPX) was up 33.76 points, or 0.76%, at 4,465.61, and the Nasdaq Composite (.IXIC) was up 274.59 points, or 1.99%, at 14,045.17.

Bank stocks (.SPXBK) dropped 0.5% as a widely watched section of the U.S. Treasury yield curve, an indicator of economic expectations, flattened to its lowest levels since October 2020.

The fourth-quarter earnings season continues with megacaps such as Google parent Alphabet Inc (GOOGL.O), Amazon Inc and Meta Platforms Inc (FB.O) expected to report later this week, following strong results from Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O) this month.

As of Friday, a third of S&P 500 companies have posted earnings, and 77.4% of them reported above analyst expectations, according to Refinitiv.

Spotify Technology (SPOT.N) rose 11.8% after Citigroup upgraded the music streaming company’s stock to “buy”. read more

Citrix Systems Inc’s (CTXS.O) shares fell 3.8% after the software company said it had agreed to be taken private for $16.5 billion including debt by affiliates of Elliott Management and Vista Equity Partners. read more

Advancing issues outnumbered decliners for a 1.94-to-1 ratio on the NYSE and a 2.97-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and no new low, while the Nasdaq recorded 16 new highs and 35 new lows.

Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru; Editing by Shounak Dasgupta

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