S&P 500 rallies after touching correction territory, erasing the day’s losses

Those gains continued late last year even as food and gasoline prices soared at rates not seen in years, along with wages, and despite the pandemic overhanging coronavirus. Speculators had also turned to investments as varied as cryptocurrencies, real estate and even trading cards and other collectibles, alarming many who saw signs that investors were getting carried away. .

So a price drop that removes some of that excess was long overdue, many market watchers said.

“We haven’t had a correction in a long time,” said Lindsey Bell, chief money and market strategist at Ally Invest. “While this selling off over the past two weeks is uncomfortable, the good news is that the sooner you have a sell off or a correction like we are seeing today, the sooner and more likely you are to make up for that lost loss. land before the end of the year.

That doesn’t mean it won’t be a turbulent year for stock market investors. Corporate earnings growth is expected to slow, especially among big tech stocks, and many companies championed by investors during the pandemic, such as Peloton and Netflix, have fallen as the return to normal means they are losing money. momentum with new customers.

But some investors worry that even the biggest tech companies will falter, which will be exacerbated if interest rates rise – forcing them to spend more of their profits on debt repayment, and also making it harder to achieve. investors’ high expectations for growth. .

Tech stocks, which have been at the forefront of the market decline this year, were also hit on Monday: the tech-heavy Nasdaq composite slid about 5%, before rebounding to end the day with a gain of about 0.6%. The Nasdaq had already crossed the correction threshold last week and is now down 13.7% from its high.

Microsoft, the next big tech company to report earnings, is expected to report on Tuesday that its bottom line rose 12% in the last three months of last year from a year ago, a substantial slowdown from in the previous quarter, which was the most profitable of all time.

More broadly, tech company profits are expected to have risen nearly 15% in the fourth quarter. That’s down from nearly 28% annual growth, according to market research firm FactSet.

“The return to normalization that we will see this year will include more moderate growth and higher interest rates,” said Ryan Jacob, the portfolio manager of the Jacob Internet Fund. “It’s a tough environment for large-cap tech.”

Jeanna Smialek, Jeff Sommer and stephen gandel contributed report.

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