By David French
(Reuters) -Wall Street ended higher on Monday, with both the Dow Jones and Dow posting new record highs, as investors bought technology stocks ahead of a busy week packed with corporate earnings and crucial economic data.
On a somewhat subdued trading day, as bond markets were closed for the federal holiday, only 9.55 billion shares changed hands, compared to the 12.05 billion shares that moved on average over the past 20 trading days.
However, there was enough upside momentum carried over from Friday, when the big banks started the third-quarter corporate earnings season on a positive note, to send the aforementioned 43,000 points for the first time.
With 41 S&P 500 companies expected to report results this week, this flood of new data points from corporate America will help investors assess the health of the U.S. economy and whether companies can continue to justify high stock market valuations.
Before that, however, it was technology stocks that lifted markets on Monday, with semiconductors particularly in vogue. An index of semiconductor companies rose 1.8% to a more than two-month high, helped by a 6.8% gain from Arm Holdings (NASDAQ:), as well as market heavyweight Nvidia (NASDAQ:), which rose 2.4% to a record close.
The information technology index was the biggest gainer among the S&P 500 sectors, rising 1.4%. Among other growth stocks, Alphabet (NASDAQ:), Apple (NASDAQ:), Microsoft (NASDAQ:) and Tesla (NASDAQ:) all rose between 0.6% and 1.6%.
The S&P 500 gained 44.82 points, or 0.77%, to 5,859.85, while the S&P 500 climbed 159.75 points, or 0.87%, to 18,502.69. The Dow Jones Industrial Average rose 201.36 points, or 0.47%, to 43,065.22.
Despite the positive milestone of the Dow Jones, profits remained in check on Monday with a decline of 2% Caterpillar (NYSE:), after a brokerage cut, and a 1.3% decline in Boeing (NYSE:) after the plane maker reported a bigger-than-expected Q3 loss on Friday.
Bank profits may have fueled hopes that solid results could help stocks continue their strong run into 2024. However, with stock valuations under pressure (the S&P 500 trades at 21.8 times forward earnings, versus a long-term average of 15.7), companies may struggle to please investors.
The S&P 500’s third-quarter earnings growth is estimated at 4.9% on an annual basis, according to data compiled by LSEG on Friday.
“If you think about the earnings backdrop that comes with it, I expect the bias is likely to lead to an upward trend in this earnings cycle,” said Kevin McCullough, portfolio advisor at Natixis Investment Managers Solutions.
“It’s not like previous earnings cycles where you started with very high expectations and it was very difficult for companies to meet them,” he said. Because the bar was now lower, it was easier for companies to achieve this. investors to view company reports in a positive light.
Tuesday’s reported numbers include a slew of major financial institutions, including Bank of America and Citigroup, as well as healthcare giants Johnson & Johnson (NYSE:) and UnitedHealth Group (NYSE:).
Investors will also look to crucial economic data this week, especially September retail sales figures, for clues about the financial health of American consumers.
Natixis’ McCullough said consumer-related data is becoming increasingly important for clues about the Fed’s thinking as the central bank shifts more toward fulfilling the growth side of its mandate.
The two Fed speakers on Monday both took a cautious tone on future interest rate policy. Minneapolis Fed President Neel Kashkari said he sees modest interest rate cuts on the horizon as inflation continues to hover near the central bank’s 2% target. During his speech this afternoon, Fed Governor Christopher Waller called for “more caution” on future rate cuts.
