Stocks reach more record highs as company earnings kick into high gear
Technology companies helped lift stocks on Wall Street modestly higher Monday, nudging the Standard & Poor’s 500 and Nasdaq indexes to all-time highs.
The S&P 500 rose 0.2%, with slightly more than half the companies in the index notching gains. Banks and companies that rely on consumer spending were among the winners, outweighing a pullback in healthcare firms and makers of household goods, among others.
A rally in technology companies, which powered much of the market’s gains in 2020, helped push the Nasdaq to its first record high since Feb. 12. The index fell more than 10% from that peak by March 8, a decline that is known on Wall Street as a correction. With Monday’s gain, the Nasdaq has recouped all of its losses from that March slide.
The Dow Jones industrial average closed slightly lower. Small-company stocks outpaced the broader market, a sign that investors are feeling confident about the economy. Treasury yields were broadly higher.
The market’s modest gains came as investors geared up for the busiest week for earnings reports this season. Of the 500 members of the S&P 500 index, 181 will report this week. Ten of the Dow’s 30 members will also release their results.
“This week is an extremely important week overall for the S&P 500 companies,” said Quincy Krosby, chief market strategist at Prudential Financial.
The S&P 500 — which has posted a weekly gain for four out of the last five weeks — rose 7.45 points Monday to 4,187.62. The Nasdaq climbed 121.97 points, or 0.9%, to 14,138.78. The Dow slipped 61.92 points, or 0.2%, to 33,981.57. The Russell 2000 index of smaller companies climbed 26.15 points, or 1.2%, to 2,298.01.
With millions of COVID-19 vaccine doses being administered daily and trillions of dollars’ worth of government-led economic support being paid out, investors have turned much of their attention to how well the global economy — and corporate profits — will do in the recovery. Profits of S&P 500 companies are expected to be up 24% from the same time last year, according to FactSet.
Earnings growth is being welcomed by investors who have had to justify high stock values as many companies continue to emerge from a pandemic slump.
“From an absolute perspective, everybody’s expensive,” said Sam Stovall, chief investment strategist at CFRA. “Investors are basically saying we can live with that because they believe earnings are going to be even stronger than currently projected.”
About a quarter of S&P 500 companies have reported quarterly results this earnings season. Of these, 84% have delivered earnings that topped Wall Street’s estimates, according to FactSet.
Shares of elevator and escalator maker Otis Worldwide climbed 7% on Monday, the biggest gain in the S&P 500, after beating analysts’ first-quarter profit forecasts.
Tesla fell 2.5% in after-hours trading following the release of the electric-car maker’s quarterly results.
Apple, Microsoft, Boeing and McDonald’s are among the other companies slated to issue reports this week.
The bond market remained relatively stable. The yield on the 10-year Treasury note rose to 1.57% from 1.56% on Friday. Bond yields have remained in this narrow range for the last several days — a respite for investors after dealing with higher volatility in the bond market earlier this year.
Investors will be looking to the Federal Reserve as the nation’s central bank holds a two-day policy meeting Tuesday and Wednesday. Investors do not expect interest rates to change for several months, but will be looking for any insights into the Fed’s thoughts on inflation and the economic recovery.
In addition, the market will be focused Wednesday on President Biden’s prime-time address to Congress and what new details it may bring on plans for an infrastructure package and tax reform.
Meanwhile, the price of bitcoin rose 8.8% to $53,877. The cryptocurrency had traded for as much as $63,000 as recently as last week.
