The S&P 500 and Nasdaq climbed on Monday, with the S&P 500 hitting a record high during the day. This rise comes as investors prepare for a busy week filled with company earnings reports and important economic data, which could challenge the current high stock market valuations.
Chip stocks were the main contributors to this surge, following a strong close last Friday after major banks reported encouraging earnings for the third quarter.
Tech giants like Nvidia and Apple saw significant gains, with Nvidia up by 2.2% and Apple up by 1.6%. Additionally, an index tracking semiconductor companies rose to its highest point in over two months.
Among the 11 sectors of the S&P 500, five showed positive movement, led by Technology, which increased by 1.5%. However, the Energy sector dropped by 0.4% due to falling oil prices.
In contrast, the Dow Jones Industrial Average faced challenges, primarily from Caterpillar, which fell by 3% after Morgan Stanley downgraded its rating on the company. The Dow lost 42.89 points, or 0.10%, ending at 42,820.42. The S&P 500 gained 29.72 points, or 0.51%, reaching 5,844.75, while the Nasdaq Composite rose by 158.43 points, or 0.86%, to 18,501.37.
Boeing also impacted the Dow negatively, dropping 2.4% after reporting a larger-than-expected loss for the third quarter and announcing job cuts and delivery delays for its 777X jet.
While strong bank earnings have fueled optimism for continued market growth, concerns remain about high stock valuations. Currently, the S&P 500 is priced at 21.8 times its expected earnings, compared to a long-term average of 15.7. This means companies may face pressure to meet investor expectations.
Michael James, managing director of equity trading at Wedbush Securities, commented, “We had a strong close last Friday thanks to bank earnings. JPMorgan really set a positive tone as we enter a crucial week for earnings.”
This week, 41 companies in the S&P 500, including Bank of America, Citigroup, Johnson & Johnson, and Netflix, are expected to report their results. Analysts estimate a year-over-year earnings growth of 4.9% for the S&P 500 in the third quarter.
Investors are also looking forward to key economic data, particularly the retail sales figures for September, which will be released on Thursday. This data will provide insights into the financial health of U.S. consumers.
In other news, Minneapolis Fed President Neel Kashkari mentioned that he anticipates modest interest rate cuts as inflation approaches the central bank’s 2% target. There is also anticipation for a speech from Fed Governor Christopher Waller later today. Current expectations show an 84.2% chance of a 0.25% rate cut at the Fed’s November meeting.
Meanwhile, shares of Investment bank B. Riley Financial jumped by 20% after announcing a deal to sell its Great American Group unit for $386 million.
On the downside, U.S.-listed shares of Chinese companies fell, with Alibaba down 1.3% and PDD Holdings down 3.9%, as investors remained uncertain about the size of China’s recent fiscal stimulus package.
Overall, more stocks declined than rose, with a ratio of 1.41-to-1 on the NYSE and 1.23-to-1 on the Nasdaq. The S&P 500 saw 32 new 52-week highs and one new low, while the Nasdaq recorded 79 new highs and 36 new lows.
