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Stock Market News for Jan 31, 2023

Wall Street closed sharply lower on Monday, dragged down by tech and energy stocks. Trade was laced with caution as investors braced for a busy earnings week and prepared for yet another rate hike by the Fed in its February meet. All three major indexes ended in the red.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.8% or 261 points to close at 33,717.09. Twenty-two components of the 30-stock index ended in negative territory, while eight ended in positive.

The S&P 500 lost 1.3% or 52.79 points to close at 4,017.77. Ten of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) fell 2.3%, 1.9% and 1.7%, respectively, while the Consumer Staples Select Sector SPDR (XLP) rose 0.1%.

The tech-heavy Nasdaq decreased 2% or 227.9 points to finish at 11,393.81.

The fear-gauge CBOE Volatility Index (VIX) increased 7.7% to 19.94. A total of 10.6 billion shares were traded on Monday, lower than the last 20-session average of 11.2 billion. Decliners outnumbered advancers on the NYSE by a 2.40-to-1 ratio. On the Nasdaq, a 2.08-to-1 ratio favored declining issues.

Central Banks to Continue Hiking Rates

Market participants are currently pricing in the fact that albeit by a mere 25 bps, interest rates are only going to go up, and not down, if things go along expected lines at the conclusion of the Fed February meeting on Wednesday. Rather than any major macroeconomic factors, the recent buoyant mood seen in trade can be accredited to a slowdown in the economy, which has led investors to hope that the Fed might take cognizance and stop further tightening of the economy.

So, even as inflation continues on its way down, Monday’s trade corrected itself from its recent path of over-buying, and stocks fell sharply. Apart from the Fed, other major central banks like the Bank of England and the European Central Bank are also expected to raise rates on Wednesday. These European counterparts of the Fed are not expected to step off the pedal, as expections are they would hike rates by 50 bps.

Tech and mega-cap growth stocks were some of the hardest hit, in apprehension of earnings due from a few giants from the sector later this week.

Oil Prices Fall on Strong Russian Exports

Energy was the biggest drag on the market on Monday. With Russian supply remaining strong despite a European Union ban and G7 price cap imposition, global oil prices closed their first week of losses last Friday. Coupled with recessionary fears arising out of interest rate hikes expected to be announced by major global central banks, oil prices extended their losses.

Brent Crude fell $1.76, or 2%, to $84.90/barrel. WTI crude fell $1.78 to $77.90/barrel, a decline of 2.2%, its steepest decline in nearly four weeks.

On Wednesday, a meeting comprising key ministers from the OPEC+ and allies led by Russia will also be in focus, although it is unlikely they will tweak the output policy just yet.

With energy and tech stocks leading the rout of the day, shares of Alphabet Inc. GOOGL and ConocoPhillips COP slid 2.5% each. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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