S&P 500 Continues Rally as Materials, Financials Power Ahead

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S&P 500 Continues Rally as Materials, Financials Power Ahead
Credit: © Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 continued to rally Friday, clawing its way out from correction territory, led by a jump in cyclical stocks including materials, financial and energy.

The S&P 500 rose 1.9% with losses since its recent peak falling to 9.8% just shy of the 10% correction territory. The Dow Jones Industrial Average added 2.2%, or 735 points, the Nasdaq gained 1.1%.

Materials led the move higher on Friday as investors bet on commodity prices continuing to trend higher because the Russia and Ukraine conflict could disrupt key commodities including energy, metals, and wheat from the region.

Nucor (NYSE: NUE ), Freeport-McMoran Copper & Gold (NYSE: FCX ), Mosaic (NYSE: MOS ) were among the biggest gainers in the sector.

“It’s hard to declare with too much certainty that the market has hit a bottom, but I do think the weaker sanctions supported the market reversal yesterday,” Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, said in interview on Friday.

U.S. President Joe Biden outlined fresh sanctions on Thursday aimed at further crippling Russia’s economy and curbing its access to key technology used to advance its military and industrial capabilities. Biden is also reportedly planning to impose sanctions on Russia President Vladimir Putin, Bloomberg reported.

There had been some pressure on the president to roll out even tougher measures including cutting Russia off from the global payments system, and implementing measures to hamper Russia oil and gas industry, which accounts for bulk of the latter’s growth.

“The as yet absence of sanctions on Russian commodities could see energy markets give up gains triggered by the initial invasion,” ANZ Research in a note Thursday.

Energy stocks were up more than 2%, shrugging off weakness in oil prices.

Financials were boosted by rising bank stocks, pushed higher by Treasury yields as signs of ongoing red-hot inflation keeps the Federal Reserve on course to begin hiking rates in March.

Signature Bank (NASDAQ: SBNY ), Truist Financial (NYSE: TFC ), Zions Bancorporation (NASDAQ: ZION ) were up more than 5%.

“What's happening in Ukraine does give the Fed a little more cover to be patient on monetary policy tightening, but a 25 basis point hike in March and a 25 basis point hike in June, are the base case scenarios,” Heppenstall said. “I see the Fed funds rate at one to-one-and-a-quarter percent … I would say four to five rate hikes sounds reasonable to me." 

Sentiment on the broader market was also underpinned by mostly upbeat quarterly results.

Block (NYSE: SQ ) reported fourth-quarter results that beat on the top and bottom lines, and delivered better-than-expected guidance, sending its shares more 25% higher.

Beyond Meat (NASDAQ: BYND ) fell more than 9% after reporting a wider-than-expected loss as revenue came in below Wall Street estimates as management  "ramped up investment spending in an environment of slowing growth at retail, leading to significant losses,” Oppenheimer said in a note. 

“We expect a meaningful reset of Street numbers and view a path to profitability [for Beyond Meat] even more challenging going forward."

Etsy (NASDAQ: ETSY ), meanwhile, reporting better-than-expected fourth-quarter earnings and revenue, sending its shares more than 14% higher.

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