U.S. stocks gained on Monday, prolonging last week’s ascent after the first big rally of 2023 last last week.

The S&P 500 (^GSPC) rose 1.3%, while the Dow Jones Industrial Average (^DJI) jumped 270 points, or 0.8%. The technology-heavy Nasdaq Composite (^IXIC) soared 2.1%.

The U.S. dollar continued a recent slump while the price of oil rallied to start the week over optimism around demand as China reopens. West Texas Intermediate (WTI) crude futures, the U.S. benchmark, surged nearly 3% Monday morning to trade just below $76 a barrel.

Retail stocks were also in focus early Monday, with several companies announcing news ahead of the key ICR Conference this week.

Lululemon (LULU) warned it expects fourth-quarter gross margins to decline as the company struggled with increased costs due to an inflation-related slowdown in consumer spending. Shares fell 8.5%.

Late Friday, Macy’s (M) also cautioned on sales growth, and shares fell 7% early into the session Monday. Abercrombie & Fitch (ANF), in contrast, said its sales decline will likely be less than feared, sending shares up about 9%.

Shares of Bed Bath & Beyond (BBBY), meanwhile, surged 38% in volatile trading — at one point ripping as much as 75% higher — after losing nearly half of their value last week when the embattled meme-stock retailer said bankruptcy was on the table. Bed Bath & Beyond is set to report earnings on Tuesday.

Alibaba (BABA) shares climbed around 3.6% Monday, rising for a sixth straight day, after co-founder Jack Ma agreed to give up controlling rights of fintech affiliate Ant Group.

Investors await December’s Consumer Price Index (CPI) due out Thursday – arguably the most important economic release of the month and the last significant reading before Federal Reserve officials meet Jan. 31-Feb. 1 to deliver their next interest rate increase. Wall Street will also face the first batch of earnings of the upcoming reporting season from Wall Street’s megabanks at the end of the week.

All three major U.S. indexes soared on Friday, propelled by signs of cooling wage growth in the latest monthly jobs report. The S&P 500, Dow, and Nasdaq all surged at least 2% in the previous session. For the week, the S&P 500 and Dow Jones Industrial Average each advanced roughly 1.5%, while the technology-heavy Nasdaq Composite rose 1%.

Nonfarm payrolls rose by 223,000 in December as the unemployment rate dropped to 3.5%. The figures show a persisting imbalance between labor supply and demand, but investors cheered easing wage pressures as a sign the Fed may reconsider its ambitious rate-hiking path.

“No doubt the labor market has been able to withstand prolonged rate hikes better than many expected,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office said in emailed comments. “Remember, though, that monetary policy acts on a lag so it’s likely an if and not a when for a slowdown in hiring.”

“The Fed minutes made it clear that rates will remain high for all of 2023, so investors should prepare for a bumpy ride, especially as we enter earnings season and get a glimpse of guidance in the coming weeks.”

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 5, 2023. REUTERS/Andrew Kelly

Monday also officially commences the first week of fourth-quarter earnings season, with JPMorgan (JPM), the largest consumer bank in the U.S., paving the way for what’s poised to be a milder period for corporate financials than usual as companies grapple with pressures from inflation and higher interest rates.

Wall Street analysts have been steadily trimming earnings estimates for S&P 500 companies over the final months of 2022.

During the past quarter, analysts have lowered their EPS forecasts by a larger than average margin of 6.5% from Sept. 30 to Dec. 31, according to data from FactSet Research. By comparison, the average downward revision to bottom-up EPS estimates over a quarter was 2.5% over the past five years, 3.3% over the past 10 years, and 3.8% over the past 20 years, per FactSet.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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