On Monday, Wall Street climbed higher, as both the S&P 500 and the Dow reached new intraday record highs, driven by investor interest in technology stocks ahead of a week filled with corporate earnings reports and significant economic data.
The upcoming wave of data from corporate America will aid investors in evaluating the U.S. economy’s strength and whether companies can maintain inflated stock market valuations.
Market participants are closely monitoring economic indicators that will influence the U.S. Federal Reserve’s perspective on its interest rate reduction strategy, which has been a key focus this year.
Despite a somewhat quiet trading day, owing to the bond markets being closed for the federal holiday, U.S. equities held on to the upward trend from Friday, when the S&P 500 (.SPX), opens new tab and the Dow Jones Industrial Average (.DJI), opens new tab achieved record closing levels following an optimistic start to the third-quarter earnings season from major banks.
Chip stocks propelled Monday’s gains, with the semiconductor index (.SOX), opens new tab surging 1.8% to a two-month high, chiefly driven by a 2.9% increase in Nvidia’s (NVDA.O), opens new tab shares. Other growth stocks saw positive movement as well, with Apple (AAPL.O), opens new tab rising 1.2% and Microsoft up 0.8%.
“There’s a persistent belief that the economy continues to progress, albeit at a slow pace, and there’s optimism surrounding expectations for third-quarter earnings that are likely good and perhaps better than anticipated,” remarked Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
“Investors are returning to these megacap tech stocks that had been overlooked while seeking broader market rotations.”
By 02:00 p.m. Eastern time, the S&P 500 (.SPX), opens new tab had increased by 40.40 points, or 0.68%, to reach 5,855.43 points, while the Nasdaq Composite (.IXIC), opens new tab rose by 156.11 points, or 0.85%, to 18,499.04. The Dow Jones Industrial Average (.DJI), opens new tab gained 147.88 points, or 0.34%, reaching 43,011.74.
This marked the first occasion for the Dow to surpass 43,000 points. Nonetheless, the index’s gains were somewhat muted by a 1.8% decline in Caterpillar (CAT.N), opens new tab following a downgrade from a brokerage firm and a 1.5% decrease in Boeing (BA.N), opens new tab after the manufacturer indicated a larger-than-expected loss for the third quarter on Friday.
Energy stocks (.SPNY) dipped 0.1%, reflecting the drop in oil prices.
Conversely, other sectors within the S&P 500 performed well, particularly the information technology index (.SPLRCT), opens new tab, which rose by 1.4%.
Bank earnings may have lifted hopes for robust results that could sustain the market’s strong performance in 2024. However, with stock valuations being stretched—the S&P 500 is trading at 21.8 times projected earnings compared to a long-term average of 15.7—companies may face challenges in meeting investor expectations.
October marks the second anniversary since the conclusion of the last bear market in 2022, with the S&P 500 having risen over 63% since its close on October 12, 2022.
This week, 41 S&P 500 companies are anticipated to release their earnings results. Year-over-year growth in third-quarter earnings for the S&P 500 is projected at 4.9%, according to data compiled by LSEG on Friday.
Investors will also be looking for vital economic data, particularly the retail sales figures for September, to gain insights into the financial health of U.S. consumers.
Meanwhile, Minneapolis Fed President Neel Kashkari has indicated that he anticipates modest interest rate cuts in the future as inflation remains close to the Fed’s 2% target. Fed Governor Christopher Waller is also slated to speak later in the day.
Speculation on a 25-basis-point reduction at the Fed’s November meeting stood at 86.1%, per the CME Group’s FedWatch tool, as traders moderated their expectations for a significant cut.
U.S.-listed stocks of Chinese companies fell, with Alibaba declining 2% and PDD Holdings (PDD.O), opens new tab losing 6.1%, as investors awaited clarity on the scale of the overall fiscal stimulus announced by China over the weekend.
