US stocks rally, but could face earnings pressure

American equities rose sharply on Monday as investors sought to recoup some of their losses following Wall Street’s worst week of the year. Investors anticipate another strong week for retail profits.

33 points, or 0.1%, were added to the Dow Jones Industrial Average. The Nasdaq Composite increased by 0.6% and the S&P 500 gained 0.2%. Once the 2-year rate reached 4.883%, its highest level since July 2007, stock movements coincided with a decline in Treasury yields. The last time it traded lower, it was about 4.782%.

Rates were once again a notable driver of equities due to renewed attention on higher inflation and the consequences for the Fed. Risk has decreased as a result of the change in Fed funds expectations and the increase in short-term yields.

Union Pacific, a railroad firm, gave the S&P a boost as well, rising 10% after the announcement that CEO Lance Fritz will step down this year.

The early 2023 surge is losing steam as traders fear that rates may rise further. The minutes from the most recent Fed meeting revealed that members are determined to keep hiking rates until inflation decreases.

Durable goods orders decreased in January due to consumers’ reduced spending on expensive items, according to economic data. In earnings, just 6% of the S&P 500 will report but investors are looking for insight into the consumer with several major retailers, restaurants, some travel and entertainment names as well as food companies set to report. Target, Costco, Lowe’s and Macy’s are some of the big names


Since the start of 2023, the S&P 500 has increased, but a warning of “earnings pressure” was published on Monday. According to Citigroup analysis, the new danger of declining company profit margins puts pressure on US stocks.


The stock market is moving towards the second half of 2023 and starting to look ahead to 2024, so investors are being warned to be ready for larger earnings pressure. They believe that despite the tendency of analysts “aggressively right-sizing 2023 predictions since mid-2022,” margin risk is not factored into the S&P 500 index.