Nasdaq gains for a second day as investors buy beaten-up tech shares like Tesla

A trader works on the trading floor at the New York Stock Exchange (NYSE), January 5, 2023.

Andrew Kelly | Reuters

Stocks rose led by technology on Monday as traders added to bets that inflation may be easing.

The Nasdaq Composite posted the biggest advance of 1%, pushed up by an 8% rally in Tesla stock. The S&P 500 followed with a 0.2% gain. The Dow Jones Industrial Average dropped 70 points, or 0.2%, as defensive drug stocks like Merck and Johnson & Johnson weighed on the index.

“The market, at least for 2023, seems a lot more optimistic than how we ended in 2022,” said Chris Zaccarelli, chief investing officer at the Independent Advisor Alliance. “Today is another one of those days where you’re really seeing growth outperform value, and you’re seeing a return to optimism in terms of what might happen for the stock market this year.”

That follows a winning shortened week for the three major indexes, with the Dow and S&P 500 posting their best weeks since November. A chunk of those gains came Friday, with the Dow rallying 700 points, while the S&P 500 and Nasdaq advanced 2.3% and 2.6%, respectively.

Friday’s gains were spurred by the latest batch of economic data. Nonfarm payrolls came in slightly higher than expectations, but wages increased at a slower pace than expected. Paired with data showing a contraction in the services sector, those indicators heightened hopes that the central bank’s rate hikes are accomplishing the intended goal of cooling the economy.

Monday marks the fifth trading day of 2023, reminding investors of a classic Wall Street rule that suggests the market will end the year up if stocks perform well in the first five sessions. The S&P 500 has ended the year positive 83% of the times it ended the first five trading sessions up — and with an average gain of 14%, according to the Stock Trader’s Almanac.

Later in the week, investors will watch for December’s consumer price index report coming Thursday and big bank earnings scheduled for Friday.

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