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US stocks bounce backfrom worst week of 2023,with lower market volatility

US stocks bounced back on Monday, recovering from the worst weekly percentage declines of the year. The S&P 500 gained 0.31%, the Dow Jones added 0.22%, and the Nasdaq 100 rose 0.74%. The CBOE Volatility Index (VIX) also fell by 3.3% to 20.95 points. However, the market's recovery was not without some turbulence.

On the economic data front, durable goods orders in the US dropped 4.5% month-over-month in January, the most since April 2020. This was largely due to a significant decline in orders for transportation equipment, which fell by 10%. Excluding transportation, durable goods orders were down only 0.4%. While this may seem concerning at first glance, it's important to note that durable goods orders can be volatile and are often subject to revisions.


Pending home sales in the US, on the other hand, jumped 8.1% month-over-month in January, signaling a strong demand for housing. This surge was largely driven by the release of pent-up demand, as well as low mortgage rates and an improving job market. However, this trend may not continue, as rising home prices and low inventory may start to dampen demand.


Seagen Inc (SGEN) shares also saw significant gains, jumping more than 10% after news broke that Pfizer is considering acquiring the company. Seagen is a biotech company that develops cancer treatments, and its portfolio includes the FDA-approved cancer drug Tukysa. This potential acquisition is still in the early stages, but it could lead to significant benefits for both companies if it goes through.


The S&P 500 closed with mixed results on Monday, with some sectors seeing gains while others fell. Consumer discretionary and industrials stocks recorded the biggest gains, while utilities and healthcare stocks settled lower during the session.


The consumer discretionary sector was buoyed by strong earnings reports from several companies, including Target (TGT), which saw its shares rise by more than 6%. The company reported better-than-expected fourth-quarter earnings and raised its full-year outlook, citing strong holiday sales and a successful rollout of its same-day delivery service. Other retailers, such as Home Depot (HD) and Lowe's (LOW), also reported strong earnings and saw their shares rise.


Meanwhile, the industrials sector was boosted by positive news regarding US-China trade negotiations. Reports emerged that the two countries are making progress on a trade deal, which helped lift shares of industrial companies that are particularly exposed to the Chinese market. For example, Caterpillar (CAT) saw its shares rise by more than 1% on Monday.


However, the healthcare and utilities sectors saw declines on Monday. The healthcare sector was weighed down by news that the Biden administration is considering supporting a proposal to waive patent rights for COVID-19 vaccines. This move, which is supported by several developing countries, would allow generic versions of the vaccines to be produced and distributed more widely. While this could help increase global vaccine access, it could also cut into the profits of vaccine manufacturers, which weighed on healthcare stocks.


The utilities sector, on the other hand, was hit by rising bond yields. As bond yields rise, dividend-paying utility stocks become less attractive to investors, as they offer lower yields than bonds. This led to a decline in the shares of many utility companies, such as Dominion Energy (D) and Southern Company (SO).


Looking ahead, the market is likely to remain volatile as investors navigate ongoing economic uncertainty and geopolitical risks.


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