The Dow Jones and the S&P 500 took a breather on Monday after registering their best weekly run of 2024 last week. However, the Nasdaq Composite outperformed among the Wall Street indices as shares of Nvidia hit another record high.
The 30-stock Dow Jones fell nearly 350 points on Monday to close below the 43,000 mark, while the S&P 500 shed 0.2%. The Nasdaq added 0.3%, closing in on its record high.
In another sign of how greed has trumped fear, the S&P 500 hasn’t suffered back-to-back losses in about 30 sessions. While a month with no consecutive down days may not sound like much, the current streak ranks among the very best since 1928, according to data compiled by SentimenTrader.
Consumer and homebuilder stocks were the worst hit on Monday on fears of interest rates remaining “higher for longer”. Target shares fell 4%, while those of Lennar and Builders FirstSource fell 4.4% and 5.2% respectively.
US 10-year yields jumped 10 basis points to 4.19%. They will test the 5% threshold in the next six months amid rising inflation expectations and concerns over fiscal spending, said T. Rowe Price’s Arif Husain. Meantime, Torsten Slok at Apollo Global Management sees higher chances the Fed will leave rates unchanged in November as the economy powers ahead.
Equities lost steam after the S&P 500 notched six straight weeks of gains. Winning streaks of that length are relatively rare, occurring only 53 times since 1950 (roughly 8% of all six-week periods), according to Adam Turnquist at LPL Financial.
Nearly one-fifth or 20% of the S&P 500 companies are reporting earnings this week. Out of the 14% that have reported so far, 79% of them have surpassed expectations.
Jeffrey Buchbinder at LPL Financial says the bar for third-quarter results is low, with analysts currently expecting only about a 3% increase in S&P 500 earnings per share.
“That low bar and a supportive economic environment points to potential upside,” he said. “However, stocks may already be pricing in solid results.”
The latest Bloomberg Markets Live Pulse survey shows respondents see Corporate America’s results as more crucial for the equity market’s performance than who wins the November election or even the Federal Reserve’s policy path.
“We believe there is continued upside ahead for stocks, especially now that we are entering a seasonally strong period of the year for markets,” said David Laut at Abound Financial. “Earnings season is heating up and we will soon hear from big tech companies and the latest on their artificial intelligence spend. For big tech, this is the show-me-the-money quarter.”
(With Inputs From Agencies.)