Stocks added to a strong January rally in the final trading day of the month.

The Dow Jones Industrial Average rose 368.95 points, or 1.09%, to 34,086.04. The S&P 500 gained 1.46% to 4,076.60. The Nasdaq Composite added 1.67% to 11,584.55, in what was its best January since 2001.

— Sarah Min

The stock market appears to be rallying in anticipation of pause in rate hikes from the Federal Reserve, even as the central bank is expected to hike its benchmark rate again on Wednesday, according to Lauren Goodwin, economist and portfolio strategist at New York Life Investments.

“This ‘Fed pause’ window we believe is likely to prove bullish, with a long duration and growthy tilt. In fact, we see that expectation as playing a large role in the 2023 rally already, and it’s a good reminder why being fully invested is an important component of building long-term wealth,” Goodwin said.

However, the January rally appears to be jumping the gun, Goodwin said, as there will likely be bad news on the economic front before the Fed pauses that could cause a reversal.

“Just remember: when the Fed pauses, it will likely be because the economy is convincingly turning over. That means the related rally is liable to be short-lived. We are fading this rally,” Goodwin said.

Instead of chasing this rally, investors should look at shifting from growth stocks to “more resilient sources of income,” she added.

— Jesse Pound

Stocks are range-bound as investors await the policy outcome from the Federal Reserve’s latest meeting, which kicked off Tuesday, according to BTIG.

“Yesterday morning we said ‘we think there are pretty good odds we stay between ~4,000 and ~4,080 over the next 48 hours.’ While we might increase the upper end of the range to 4,100, we haven’t seen anything since then to materially change that view,” BTIG’s Jonathan Krinsky wrote in a Tuesday note.

Where stocks will go after the meeting will depend on whether the S&P 500 is at the top or lower end of that range, according to the note.

“In other words, if we are at ~4,080 on Wednesday at 2pm, any upside reaction is likely dampened, and downside potential increases. Conversely, if we are closer to 4,000, then the short-term downside reaction is likely less severe,” Krinsky wrote.

“In other words, counterintuitively, whatever your bias is you likely want the opposite move into Wednesday,” he added.

— Sarah Min

January 31 is the best day for the S&P 500 in the month of January, according to data compiled by Carson Investment Research on the average performance per day since 1950.

The S&P 500 was up 0.97% Tuesday. In January, the S&P 500 gained 5.7%, which is the best monthly performance for the index since November.

The Wall Street saying, “so goes January, so goes the year,” has rung true 87% of the time when January was positive, for an average gain of 15.9% for the full year, CFRA chief investment strategist Sam Stovall told CNBC earlier this month. Some investors attribute the January rally to the “January Effect,” a stock market phenomenon that typically refers to an increase in stock prices and the outperformance of small-cap stocks in the first few weeks of a new year.

— Pia Singh

PayPal’s stock gained more than 2% Tuesday after the payments company shared plans to cut 2,000 jobs, or roughly 7% of its workforce.

The reductions address a “challenging macro-economic environment,” said Dan Schulman, the company’s president and CEO, in a release posted to the PayPal’s website.

The S&P 500 is trading just above 4,000 in the final trading day of January and is on pace to post a monthly gain of more than 5.5%. Rich Ross, charts analyst at Evercore ISI, sees upside to 4,325 in the first half of the year.

“The sum of the charts continues to suggest that the bear market is over and a new bull phase began in Q4 of ’22,” he said in a note. “While I made that call in Q3 of ’22, the pillars of that view from both the top down and bottom up have only gotten stronger.”

He noted the dollar, crude, inflation, credit spreads and the oace of policy have all peaked, while breadth in global equities are expanding “in a bi-partisan show of force.”

— Tanaya Macheel

Stocks reached session highs in the afternoon on the final trading day of January. The Dow Jones Industrial Average added 240 points, or 0.71%. The S&P 500 gained 0.96%, while the Nasdaq Composite was 1.19% higher.

That helped the major averages build on a strong start to 2023.

— Sarah Min

Technical analysis of ETFs shows that the January market rally is broad, but investors still appear to be hesitant, according to a note from Strategas ETF strategist Todd Sohn.

“Using a simple definition to define trend – the 50-day moving average trading above the 200-day moving average – shows over 60% of equity ETFs are now trading in an uptrend vs. just 5% at the end of September 2022,” Sohn said. “It’s a noted improvement, but recent flows have been surprisingly restrained – January is averaging about $1 Bn per day vs. a 2-year average of $2.1 Bn.”

The relatively meager inflows could the result of “unease” that the rally is being led by stocks that were beaten down last year, Sohn added.

— Jesse Pound

Cathie Wood is on pace to notch her best month ever as her beaten-down innovation darlings staged a big comeback in the new year.

Wood’s flagship Ark Innovation ETF (ARKK) jumped over 3% on Tuesday, bringing its January return to more than 27%. The fund is slated for its strongest month ever since its inception in 2014.

Leading the 2023 rally were the largest laggards of last year, including Coinbase, which has skyrocketed about 66% year to date. Shopify, Tesla, Exact Sciences, Roku and Nvidia have all rallied more than 30% this year.

The Defiance Digital Revolution ETF (NFTZ) will begin liquidation next month, according to a press release, making it the latest casualty in last year’s crypto decline.

The fund holds stocks that have exposure to the non fungible token market, or NFTs, which soared in value at the height of the crypto boom before seeing trading volume dry up quickly last year.

The Defiance fund, which launched in December 2021, has a total return of -54% over the past year and has less than $6 million in assets under management.

— Jesse Pound

Homebuilding stocks outperformed on the back of stronger-than-expected earnings results from PulteGroup.

PulteGroup shares jumped more than 8% during midday trading on Tuesday. Meanwhile, Lennar shares added 3%, and D.R. Horton shares were up 2.8%.

— Sarah Min

It’s the busiest week of earnings season, with thirty companies representing 6.8% of S&P 500’s market cap reporting fourth-quarter earnings today. 38.9% of the S&P 500’s market cap has already been reported. 

Earnings are beating estimates by 2% and 63% of companies have topped projections, according to a Credit Suisse note sent to clients on Tuesday morning. Earnings per share are on pace to dip by 0.9%, the firm said.

Credit Suisse noted that more domestically-oriented companies in the broader index are delivering faster growth in earnings per share compared to their globally-oriented peers, at 0.1% and -1.6%, respectively.

— Pia Singh

These stocks are among those making the biggest moves in midday trading:

• General Motors — The automaker’s stock surged more than 7% after the company cruised past analyst estimates on the top and bottom lines for its fourth quarter. The company reported an adjusted $2.12 per share on $43.11 billion in revenue.
• Caterpillar — Shares fell about 3% after Caterpillar reported a 29% earnings decline. The construction machinery and equipment maker said higher manufacturing costs and foreign currency effects weighed on its quarterly results.
• UPS — Shares of United Parcel Service gained 4% after shipping and transportation giant posted earnings of $3.62 a share, slightly ahead of the $3.59 expected by analysts surveyed by Refinitiv. UPS also raised its dividend and sanctioned a new $5 billion stock repurchase plan.
• PulteGroup — Shares of the homebuilder soared 9% in midday trading after the company reported better-than-expected fourth quarter earnings. The company reported $3.63 in adjusted earnings per share on $5.17 billion of revenue, and its homebuilding gross margin rose year over year.

Click here to see more stocks making midday moves today.

— Pia Singh

Investors can expect lackluster results from Apple when it reports this week, according to Barclays.

Analyst Tim Long reiterated an equal weight rating on Apple, saying the firm dealt with a challenging holiday season, and could issue weaker guidance.

“We see a miss for Dec-Q across hardware and Services. March-Q looks to be at risk due to deteriorating demand trends,” Long wrote in a Monday note.

“What started out as production-driven cuts have moved to demand weakness across product categories. We are also concerned by decelerating Services growth. At a 20% premium to the S&P 500, we see the stock as fairly valued at best,” Long continued.

Apple is expected to report its first year-over-year revenue decline since 2019. The tech giant couldn’t make enough of its high-end iPhone models when its assembly plant in China was shut down because of Covid.

Apple shares are up more than 10% this year amid a broad rally for tech stocks. The iPhone maker was down more than 26% in 2022. The stock ticked up 0.2% in Tuesday morning trading.

Apple reports earnings after the bell Thursday.

— Sarah Min

Lucid‘s recent pop will likely be short-lived, Morgan Stanley said.

The electric vehicle maker rallied 43% Friday on the back of reports indicating Saudi Arabia’s Public Investment Fund was considering buying the more than 30% of shares it does not already own.

But analyst Adam Jonas expects the stock to hit $5 in the next 12 months — meaning it would fall 57.4% from where it closed Monday and reach a new all-time low — due to what he sees as a tough road ahead. The stock previously reached an all-time intraday low of $6.09 and closing low of $6.17 earlier this month.

“We believe the fundamental outlook facing Lucid is more likely deteriorating than improving,” Jonas said in a note to clients Tuesday.

CNBC Pro subscribers can read more here.

The S&P 500 was up 0.6% during Tuesday morning trading, with nearly all sectors trading in positive territory.

Ten out of 11 sectors were higher on the day. Consumer discretionary, materials and real estate led the gains, up about 1.5%, 1.1% and 1%, respectively.

— Sarah Min

Consumer discretionary stocks led gains in the S&P 500 on Tuesday, with the sector up about 1% during morning trading.

General Motors was the biggest advancer in the sector. The stock jumped more than 8% after the automaker reported strong earnings.

Meanwhile, utilities underperformed the broader market index, down nearly 0.9%.

— Sarah Min

March copper contracts fell as low as $4.1185 per pound Tuesday, but still left Dr. Copper up about 8.7% in January and on pace for a third straight monthly gain. January is poised to become the best start to the year for the metal since 2017.

Meanwhile, London Metal Exchange aluminum on Tuesday matched Monday’s low of $2,555, still leaving aluminum higher by 8.5% in January and on course for its third gain in four months and the best start to a year since 2012.

Metals traders are awaiting this week’s central bank rate decisions from the Federal Reserve, European Central Bank and Bank of England, while Reuters reported that copper demand in China remains stagnant.

— Scott Schnipper, Gina Francolla

Atlantic Equities moved to the sidelines on Bank of America as the firm sees net interest margins weakening for banks.

Analyst John Heagerty downgraded the stock to neutral from overweight and lowered his price target by $5 to $40. The new target implies a 13.3% upside from where the stock closed Monday.

Heagerty said it will be difficult to have operating leverage as net interest income, which finds the difference between revenue from interest-bearing liabilities and the cost to the bank of servicing them, slows for Bank of America and other financial services names.

CNBC Pro subscribers can read the full story here.

— Alex Harring

March West Texas Intermediate crude oil contracts fell as low as $76.55 per barrel Tuesday, the lowest in about three weeks, and leaving crude on the verge of declining for the seventh month in eight. Moreover, crude is on pace to settle below its 50-day moving average ($77.62), also for the first time in nearly three weeks.

WTI is also on course in January to decline for a third straight month.

The Energy Select Sector SPDR Fund (XLE) is off about 0.3% premarket Tuesday, on course for a third straight decline. Exxon (XOM) (earnings), SLB and Devon (DVN) are all down about 1% in early Tuesday trading.

Month-to-date, the Energy ETF is still up about 1%, and on the verge of advancing for the third month in four.

— Scott Schnipper, Gina Francolla

There are contrarian indicators coming from the futures market that have Wolfe Research turning more positive on stocks. Nasdaq 100 futures are down 29% from the peak and now large speculators have flipped to their most aggressive short position in over two years, analyst Rob Ginsberg wrote in a note Monday.

“With the Fed on Wednesday and earnings from AAPL, AMZN and GOOGL on Thursday, the contrarian in me is getting increasingly bullish,” he said.

In other words, given that a lot of bad news has already been priced in, anything positive from earnings or the Federal Reserve could be good for stocks.

On Wednesday, the central bank is set to announce another rate hike, which is expected to be one-quarter of a percentage point. Investors will also be watching to see what the Fed indicates about any future increases.

— Michelle Fox

Compensation costs for civilian workers increased at a slower pace in the fourth quarter, the Bureau of Labor Statistics reported Tuesday.

The employment cost index, an important inflation gauge for the Federal Reserve, showed compensation increased 1% for the October-to-December period. That was a touch below the 1.1% estimate from Dow Jones. It also was lower than the 1.2% increase in the third quarter.

On a 12-month basis, the ECI rose 5.1%, up slightly from the 5% gain in the third quarter.

—Jeff Cox

Here are some companies making the biggest moves before the bell:

• McDonald’s — Shares dipped more than 1% after McDonald’s reported its latest quarterly results. The fast food giant topped earnings and revenue estimates, saying customers are increasingly visiting its restaurants. Still, McDonald’s CEO Chris Kempczinski said he expects “short-term inflationary pressures to continue in 2023.”
• United Parcel Service – Shares of UPS rose 1.9% after the company reported earnings that beat analyst expectations. The company posted adjusted earnings per share of $3.62 on $27.08 billion in revenue. Analysts had forecast earnings of $3.59 per share and $28.09 billion in revenue, per Refinitiv.
• Exxon Mobil — The oil giant was under pressure despite reporting upbeat financial results for the latest quarter. The company, whose stock price rallied more than 80% last year, saw a tightening in supplies as economies began recovering, CEO Darren Woods said in a statement. Shares fell more than 1%.

For more stocks making moves in premarket trading, click here.

— Hakyung Kim

Pfizer shares dipped more than 2% after the vaccine maker said it expects 2023 sales to fall by as much as 33% compared to a record 2022.

The pharmaceutical company issued sales guidance of $67 billion to $71 billion for 2023. Last year, Pfizer booked $100.3 billion in revenue, which was an all-time high boosted by Covid vaccine and antiviral sales.

— Sarah Min, Spencer Kimball

McDonald’s shares dipped more than 2% in premarket trading after the fast food company reported its latest quarterly results. The fast food giant topped earnings and revenue estimates, saying customers are increasingly visiting its restaurants.

The company posted earnings per share of $2.59, better than the $2.45 expected by analysts polled by Refinitiv. It reported revenue of $5.93 billion, greater than the forecasted $5.68 billion.

McDonald’s CEO Chris Kempczinski said he expects “short-term inflationary pressures to continue in 2023.”

— Sarah Min, Amelia Lucas

Shares of Exxon Mobil fell more than 3% despite the oil giant reporting earnings and revenue that beat analyst expectation.

Exxon earned $3.40 per share on Revenue of $95.43 billion. Analysts expected earnings per share of $3.29 per share on revenue of $94.67 billion.

“While our results clearly benefited from a favorable market, the counter-cyclical investments we made before and during the pandemic provided the energy and products people needed as economies began recovering and supplies became tight,” CEO Darren Woods said in a statement.

Exxon shares rallied more than 80% in 2022 thanks in large part to higher oil prices.

Caterpillar shares fell more than 2% after the industrial giant posted a its latest quarterly results. The company reported adjusted earnings of $4.27 per share, above a Refinitiv consensus estimate of $4.02 per share. Caterpillar’s bottom line excludes an “unfavorable ME&T foreign currency impact in other income (expense) of $0.41 per share.”

— Fred Imbert

Correction: Caterpillar reported adjusted earnings per share of $4.27, according to Refinitiv. A previous version of this story used the company’s adjusted $3.86 figure, which did not strip out for a “foreign currency impact.”

General Motors reported quarterly earnings that beat analyst expectations, sending the auto stock up more than 3% in the premarket.

GM earned $2.12 per share in the fourth quarter, beating a Refinitiv forecast of $1.69 per share. The company’s revenue of $43.11 billion also beat a consensus estimate of $40.65 billion. Additionally, GM forecast another strong year.

— Fred Imbert, Michael Wayland

The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.

In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.

It also revised its projection for 2024 down to 3.1%.

Read the full story here.

– Silvia Amaro

Stocks have so far posted a strong start to the year after the worst year for stocks since 2008. This is where all the major averages stand ahead of the final trading day of January.

Dow Jones Industrial Average:

• Up 1.72% for the month and year
• On pace for third positive month in four

S&P 500:

• Up 4.64% this month
• On track for best January since 2019
• Headed for third positive month in four

Nasdaq Composite:

• Up 8.86% in January
• On pace for best monthly performance since July

— Samantha Subin, Chris Hayes

These are some of the stocks moving the most in overnight trading:

NXP Semiconductors — NXP Semiconductors’ stock dropped more than 3% after its revenue outlook for the first quarter fell short of analysts’ expectations, according to FactSet.

Whirlpool — Whirlpool shares gained more than 1.9% in extended trading after the appliance maker shared strong guidance for the year. Fourth-quarter revenue came slightly behind analyst expectations.

Read the full list of stocks moving after the bell here.

— Samantha Subin

Ed Yardeni is more bullish on the economy this year — telling investors and analysts to take a comprehensive look at the global economy.

“I think we have to look beyond the US, for starters, and see that there’s more and more evidence that the global economy is better than people had feared last fall. Europe looks like it’s not going to have a recession, and we see China coming out of its Covid funk,” Yardeni said on CNBC’s “Closing Bell: Overtime.”

“Meanwhile, when we come back to the U.S., there’s still a big debate about a soft versus hard landing.”

Yardeni added that he anticipates a soft landing due to falling bond yields and the inverted yield curve. 

The closely followed strategist also noted that while he believes the economy will grow at a slow pace this year, the worst has passed. According to Yardeni, the economy has already experienced a “rolling recession” in the past year, with different industries and sectors having experienced slumps during different times. 

Taking into account that the economy will experience a soft landing, Yardeni said the Fed will not maintain interest rates at the high 5% range for a long time, downplaying fears of an economic downturn resulting from a high federal funds rate. 

“I think inflation is turning out to be very transitory,” he said. “I’m an optimist on inflation.”

— Hakyung Kim

The economy will slow down this year — but there are two ways for investors to gain earnings in the market, according to Adam Parker, Trivariate Research’s founder and CEO.

“I think there are two ways to beat the market this year,” Parker said on CNBC’s “Closing Bell: Overtime.” 

“There are cyclicals that are so cheap, they can improve their balance sheets in this eroding backdrop,” such as pharmaceuticals, metals, consumer finance and energy stocks, said Parker. “Or, I have to get stuff that can earn gross profits well through this eroding economy.”

“It’s too early to make a big bet, but there are a lot of software companies that are doing interesting things with the cloud, that are going to grow their gross profits,” he added.

The market has rallied since the beginning of the year thanks to optimism on falling inflation and the prospect of slower interest rate hikes by the Fed. However, Parker added that he cautions investors from veering too bearish or bullish on the economy this year, saying that both extremes have their drawbacks. 

“I’m not wildly bullish or bearish, but I think people got too negative,” he said. “… I don’t want to get too negative and, you know, get locked in this bear den.”

— Hakyung Kim

Stock futures rose slightly in overnight trading Monday.

Futures tied to the S&P 500 added 0.19%, while futures connected to the Dow Jones Industrial Average inched 0.07%, or 25 points, higher. Nasdaq-100 futures gained 0.19%.

— Samantha Subin