The stock market on Monday added to last week's rally as earnings season began. But some retail stocks dipped due to weak forecasts from Lululemon Athletica and Macy's. Tech and chip stocks surged.
The Nasdaq composite rose 2% while the S&P 500 gained 1.3%. The Dow Jones Industrial Average added 0.8%. The small-cap Russell 2000 index surged 1.3%.
Volume fell on the Nasdaq but rose on the NYSE vs. the same time on Friday.
The yield on the benchmark 10-year Treasury note slid 4 basis points to 3.53%. Crude oil prices rose 1.6% to $74.94 per barrel.
On Friday, all three major indexes surged more than 2% after a strong jobs report featured modest wage gains.
In her 2023 outlook, Maria Vassalou, co-chief investment officer for multi-asset solutions at Goldman Sachs, said: "In 2023, we believe underlying economic and market conditions may get more challenging before they ease. For instance, we expect the U.S. economy to enter recession in 2023 as the Federal Reserve pushes borrowing costs to 5% or higher."
The S&P Technology Select Sector ETF led all 11 S&P sectors, up 2.9%.
Most stocks broke out of bases. Modine broke out of a flat base in heavy volume. The maker of industrial thermal products is in a buy zone. Aircraft leasing firm AerCap Holdings rose above the 62.38 buy point of a handle. Chip equipment maker Amkor is rallying past the 29.20 buy point of a cup base.
Several other stocks are touching buy points but have not made solid moves above them.
Stock Market Gains, Led By Tech Stocks
Chinese stocks continued to rally Monday, with the Shanghai Composite up 0.6% for its sixth straight day of gains. Hong Kong's Hang Seng Index surged 1.9%. Beijing removed all border restrictions over the weekend, bringing an end to pandemic measures that effectively sealed the country off from the rest of the world.
In London, the FTSE gained 0.3%. The German DAX rose 1.3%, and the French CAC gained 0.7%.
Chip stocks rallied, led by Nvidia and ASML Holdings. EV makers also surged, including Tesla, which jumped nearly 8%, bouncing back from hitting a two-year low on Friday.
Acuity Brands shares climbed 4.9% after the company posted better-than-expected fiscal Q1 results.
Commercial Metals, an IBD 50 member, inched up 0.2% after posting results that beat Wall Street estimates on both earnings and sales. CMC is extended off a cup base but looks to be forming a new base.
The Innovator IBD 50 ETF gained 1.3% Monday, led by building products provider Griffon and computer hardware maker Super Micro Computer.
Regeneron Pharmaceuticals stock was down more than 6% after the company preannounced fourth-quarter revenue of $1.5 billion for its best-selling eye drug Eylea. That was slightly below analyst expectations. The stock is on pace for its largest percentage decrease since March 20, 2020, when it fell 10.49%.
Retail Stocks Dip On Weak Forecasts
Retail stocks came under pressure in Monday's stock market after Lululemon and Macy's warned of weaker-than-expected Q4 performance.
LULU stock plummeted nearly 8%. Macy's shares were down more than 7%.
Lululemon warned that fourth-quarter gross margin would decline, pressured by cost increases and cautious consumer spending. At the same time, the fitness-clothing retailer raised and tightened revenue guidance. It also tightened the range of its earnings guidance.
Management now projects earnings of $4.22 to $4.27 per share, up from $4.20 to $4.30 in an earlier forecast. Revenue is projected at $2.66 billion to $2.7 billion, vs. initial guidance of $2.61 billion to $2.66 billion.
Meanwhile, Macy's said Q4 revenue would come in near the low end of expectations, previously projected at $8.16 billion to $8.4 billion. Earnings-per-share guidance remained unchanged at $1.47 to $1.67. Gross margin guidance also remained unchanged.
"Black Friday/Cyber Monday sales were in line with our expectations, while the weeks leading up to and following Christmas were ahead," said Macy's CEO Jeff Gennette in a statement. "However, the lulls of the nonpeak holiday weeks were deeper than anticipated."
Lululemon shares were rising off technical support in a five-week consolidation. The stock gave up 18% in 2022. Macy's stock is also rising from support in a six-week cup base. Shares are up 46% from a late-September low, after losing 23% in 2022.
Stock Market Movers And Shakers
Other retail stocks fell in sympathy, including Nordstrom, down 1.2%, and Kohl's, down 1.8%.
Online retailers bucked the trend, with Amazon.com up more than 3%.
Dow Jones and stock market tech leaders Apple and Microsoft gained more than 2%.
Albireo Pharma jumped more than 92% after French pharmaceutical company Ipsen said it's buying the biotech for $952 million. Under the definitive merger agreement, Ipsen will acquire the liver disease treatment specialist for $52 per share.
Q4 earnings season kicks off in earnest this week with highly anticipated results from Dow Jones component JPMorgan Chase, Bank of America, Citigroup, KB Home and UnitedHealth Group.
Follow Michael Molinski on Twitter @IMmolinski
