Energy and mining stocks lift ASX 1.3%; Telstra reveals $1.6b capex

US stocks added to their best three-day rally since 2020, as investors bid up companies that benefit from a strong economy amid speculation the Federal Reserve won’t derail growth as it fights inflation.

The S&P 500 rallied into the close of trading, led by gains in energy producers and banks, while the tech-heavy Nasdaq 100 also advanced. With the gains, the S&P 500 has now surpassed the midpoint of last month’s peak-to-trough decline, indicating to some chartists a full recovery may be underway.

The S&P500 closed 0.7 per cent higher while the Dow Jones and the Nasdaq both increased by 0.8 per cent.

After the bell, Alphabet Inc. gained on strong corporate results and a 20-for-1 stock split. Advanced Micro Devices Inc. rose after an earnings beat. Meanwhile, Starbucks Corp., PayPal Holdings Inc. and General Motors Co. declined after missing estimates. Treasury yields rose and the dollar was weaker.

Earlier in the session, equities had struggled for direction as solid economic data rekindled nerves over the pace of the Federal Reserve’s pivot to more restrictive policy. Data on job openings and manufacturing showed a resilient economy that the Fed is trying to cool after inflation spiked to the highest in four decades. However, bank officials have indicated they are aware of the threat to stifling growth.

“It feels like we are starting February with an uneasy truce between buyers and sellers, following the brutal correction we had last month,” said Mike Bailey, director of research at FBB Capital Partners. “Looking ahead, my sense is investors see Jay Powell as having his foot a few inches away from the brakes. Will the market get a gentle tap? Or will the Fed slam on the brakes?”

Waves of volatility have swept across markets after Powell, chairman of the Fed, signalled swifter monetary-policy tightening than many expected. However, regional Fed presidents Mary Daly and Esther George have expressed caution over faster-than-necessary tightening.

Meanwhile, corporate earnings are also providing equities some support. Exxon Mobil Corp. posted its highest earnings in eight years on aggressive spending cuts. United Parcel Service Inc. projected annual sales above expectations. And UBS Group AG boosted its buyback program after an earnings beat.

“I don’t think it’s a coincidence that the market has started to stabilise as we start to get into earnings season,” said Giorgio Caputo, senior fund manager of the JOHCM Global Income Builder fund. “You’ve had strong reports from companies like Microsoft and Apple, which are in many ways, bellwethers for the economy of the moment and the parts of the economy that are growing.”

Also reporting this week are Amazon, Ford Motor, Qualcomm, Sony, and Spotify.

Bloomberg