Coming off their best week in several months, U.S. stocks posted modest gains on Monday, closing near their highs of the session. Inflation fears remained on the radar, while short-term interest rates increased to their highest levels in 18 months. Investors also parsed the latest economic data from China and looked ahead to a busy week of third-quarter earnings reports after banks got things off to a strong start last week.
Dow Jones Industrial Average
closed down 36 points, or 0.1%, after being down some 260 points shortly after Monday’s opening bell. The
ticked up 0.3% and 0.8%, respectively, after opening the week in the red. It was the fourth-straight gain for both indexes.
Investor concerns on familiar themes such as inflation, supply-chain disruptions, and central bank stimulus seemed to dissipate through the day. Also in the spotlight Monday were poor economic data out of China showing the macro impact of some of these forces.
Chinese gross domestic product expanded by 4.9% year-over-year in the third quarter, while industrial production for September rose 3.1%. Both measures fell short of expectations.
“Manufacturing was hit hard by supply-chain disruptions due to Covid as some port operations were hit in 3Q21, and chip shortages continued in the quarter,” said Iris Pang, the chief economist for Greater China at ING bank.
index slipped 0.1% and the pan-European
The 10-year Treasury yield settled up 0.01 percentage point, to 1.58%, after topping 1.6% earlier in the day. The easing helped lift growth stocks during Monday’s trading. Short-term interest rates have also been on the rise; the 2-year yield climbed 0.02 percentage point, to 0.42%—the highest it has been since March of 2020.
Bond yields have been surging since the end of September, when the Federal Reserve suggested it is turning its attention toward providing less accommodation to the economy. Higher interest rates can make borrowing less attractive for businesses, which can in turn stunt economic growth. Higher long-term yields also increase the discount rate on companies’ future earnings, making them less valuable today.
Growth areas of the market generally outperformed value and defensive sectors. Consumer discretionary shares were the best off in the S&P 500, rising 1.2% on Monday, followed by a 0.8% gain for technology. Utilities were the day’s laggards, finishing down 0.9%.
Energy stocks made a major mid-day reversal, having been the best-performing group in the S&P 500 on Monday morning then finishing the day essentially flat. A rise then fall in the price of oil was behind that about-face: U.S. futures for West Texas Intermediate crude rose to a seven-year high above $83 a barrel, before finishing up just 0.2% on the day at $82.44.
Third-quarter earnings season ramps up this week, with 72 S&P 500 companies scheduled to report. Highlights will include results from notable companies in telecom, consumer staples, energy, technology, health care, and the airline industry.
(ticker: ACI) and
(STT) got the ball rolling on Monday.
Procter & Gamble
Johnson & Johnson
(JNJ) are Tuesday morning’s highlights, followed by
United Airlines Holdings
(UAL) after the market closes.
Big banks including
Bank of America
(MS) reported well-received earnings last week. Those banking businesses are less exposed to the supply chain and labor challenges impacting much of the economy, however. For the rest of the market, guidance and management commentary about those and other factors could be particularly important, with analysts already expecting strong results for the third quarter.
“The S&P 500’s 3Q earnings estimate has been revised up by 11% into the quarter. That is the largest upward 3Q revision in the last 20 years,” wrote Morgan Stanley strategists Michael Wilson in a report on Monday. “The question is how do management teams position the risks—limited to 3Q/4Q? stretching into 2022? This will determine the magnitude of deceleration we see in earnings revisions breadth, which has implications for index price level.”
Elsewhere, the price of Bitcoin was approaching its all-time high of near $65,000 amid expectations that U.S. regulators would approve the first exchange-traded fund tracking Bitcoin price futures. The leading crypto was around 2% higher Monday above $61,000.
Here were eight stocks on the move Monday:
Albertsons Companies stock rose 3.3% after the company reported a profit of 64 cents a share, beating estimates of 45 cents a share, on revenue of $16.5 billion, above expectations for $15.8 billion.
State Street stock jumped 2.3% after the company reported a profit of $2 a share, beating estimates of $1.92 a share, on revenue of $2.99 billion, above expectations for $2.96 billion.
(OXY) stock gained 4.1% after getting upgraded to Buy from Hold on Truist and as the broader energy sector rallied.
(DIS) stock dropped 3% after getting downgraded to Equal Weight from Overweight at Barclays.
(NTAP) stock dropped 4.3% after getting downgraded to Sell from Neutral at Goldman Sachs.
(TSLA) stock rose 3.2% ahead of its earnings report on Wednesday. The company has already disclosed that it delivered a record 241,000 vehicles in the third quarter.
(Z) shares fell 9.5% after the company paused its home-flipping business.
(M) stock jumped 17.5% after the Wall Street Journal reported that Saks Fifth Avenue was looking to IPO its e-commerce unit at a $6 billion valuation. Activist investor Jana Partners is pushing Macy’s to do the same with its own online business.
Write to email@example.com