All three U.S. major stock-market indexes were trading not far from their intraday records on Monday, with investors awaiting this week’s pivotal Federal Reserve meeting.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA, +0.12% rose 55 points, or 0.2%, to 35,874.70. The blue-chip gauge traded as high as 36,009.74, topping the 36,000 milestone for the first time.
- The S&P 500 SPX, -0.09% advanced 4 points, or less than 0.1%, at 4,609.38 after trading at a record intraday peak.
- The Nasdaq Composite COMP, +0.20% rose 62 points, or 0.4%, to 15,560.86, also hitting an intraday record.
On Friday, the Dow, S&P 500 and Nasdaq Composite all closed at records. Last month’s 7% rise for the S&P 500 was the best since November 2020, after the U.S. election and Pfizer’s announcement of the results of a study into its COVID-19 vaccine.
What’s driving markets?
The backdrop for the stock market’s gains have been impressive earnings. According to Credit Suisse, earnings by S&P 500 companies have beaten estimates by 10% in the third quarter.
“Earnings have been more positive than feared early in the month, which we believe broadly explains the positive move in equities this month, but upside is clearly less than the prior three quarters,” said Tavis C. McCourt, a strategist at Raymond James, in a note.
McCourt noted that in the three previous quarters, 2021 consensus earnings per share for the S&P 500 was boosted by around $10 each earnings season. This season is on track for a rise of around $3 to $4, taking it from roughly $199 to $203 a share. “That is still very strong historically, but it also shows the meaningful sting of supply-chain shortages,” he said.
Earnings growth was bound to slow as the economic restart ran its course, wrote strategists at the BlackRock Investment Institute, in a note.
“We still see above-trend U.S. earnings growth even as its pace is moderating as the restart runs its course,” they said. “The broadening restart and low real rates support our tactical pro-risk view. We prefer European equities where the earnings restart bump is catching up to the U.S. Within the U.S. we prefer quality shares.”
Investors will have plenty of results to sift through again this week, with 167 S&P 500 companies expected to report, a similar number to last week as the peak of earnings season continues. Among the highlights will be results from drugmakers Pfizer Inc. PFE, -0.46% and Moderna Inc. MRNA, -3.80%.
The Fed will announce its latest monetary policy decision on Wednesday, with expectations it will finally announce the tapering of asset purchases. Traders will be closely scrutinizing the commentary around its latest actions.
“We expect [Fed Chairman Jerome] Powell will not actively push back on market pricing of rate hikes given elevated uncertainty about the outlook, particularly as it relates to upside inflation risks,” said Deutsche Bank economists led by Matthew Luzzetti.
A closely-followed index of U.S.-based manufacturing inched lower to 60.8% in October from 61.1% in the prior month, the Institute for Supply Management said Monday. A reading above 50% indicates an expansion in activity.
In other data, the IHS Markit final purchasing managers index reading for October fell to 58.4 versus an initial estimate of 59.2.
Contributing to an upbeat tone in early trade was a weekend deal on steel and aluminum tariffs from the U.S. and European Union, as well as a convincing win for the ruling Liberal Democratic Party in Japan that sent the Nikkei 225 NIK, +2.61% up 2.6%
Which companies are in focus?
- Shares of AMC Entertainment Holdings Inc. AMC, +3.08% rose 2.7% after the cinema operator said October admissions revenue was the highest since the start of the pandemic. The popular meme stock is up more than 1,500% in 2021.
- Videogame platform Roblox Corp. RBLX, -2.46% came back online Sunday after crashing Friday, with the company citing an internal issue. Shares fell 2.5%.
- American Airlines Group Inc. AAL, +2.24% shares edged up 1.2% even after the carrier canceled nearly 2,000 weekend flights, citing weather and staffing issues.
- Harley-Davidson Inc. HOG, +8.25% shares jumped more than 7% after the U.S.-EU agreement on steel and aluminum tariffs. The motorcycle maker was facing a European retaliatory tariff of 56%.
- McKesson Corp. MCK, +0.49% said it would sell its U.K. businesses, including LloydsPharmacy, LloydsDirect, AAH Pharmaceuticals, LloydsPharmacy Clinical Homecare, LloydsPharmacy Online Doctor, MASTA and John Bell & Croyden, to asset management group Aurelius. McKesson shares rose 1%.
- Loews Corp. L, +2.27% reported a rise in third-quarter earnings, as business improved at its subsidiaries. Shares gained 0.6%.
- Coca-Cola Co. KO, -0.25% confirmed Monday that it would buy the remaining 85% of BodyArmor that it doesn’t already own for $5.6 billion in cash. The deal was originally reported over the weekend by The Wall Street Journal. Coca-Cola shares were down 0.3%.
What are other markets doing?
- The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 1.578% rose 3 basis points to 1.587%. Yields and debt prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, -0.18%, a measure of the currency against a basket of six major rivals, was down 0.1%.
- Oil futures moved higher, with the U.S. benchmark CL00, +0.57% up 0.9% at $84.31 a barrel. Gold GC00, +0.67% ticked up around 0.5%.
- In European equities, the Stoxx Europe 600 SXXP, +0.71% rose 0.8%, while London’s FTSE 100 UKX, +0.71% slipped 0.2%.
- The Shanghai Composite SHCOMP, -0.08% finished down by less than 0.1%, while the Hang Seng Index HSI, -0.88% ended 0.9% lower.