U.S. stocks were off to a cautious start Monday, as investors awaited a barrage of earnings and pivotal economic news with major indexes at or near record levels.
What’s happening
-
The Dow Jones Industrial Average
DJIA
was off 2 points, or less than 0.1%, at 38,107. -
The S&P 500
SPX
rose 2 points, or less than 0.1%, to 4,893. -
The Nasdaq Composite
COMP
was up 13 points, or 0.1%, at 15,469.
Stocks ended Friday with a third straight weekly gain. The Dow logged its fifth record close since the end of 2023, while the S&P 500 finished a 10th of a percentage point below its all-time closing high and the Nasdaq Composite ended less than 4% from its record close set on Nov. 19, 2021.
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What’s driving the market
“This could be the greatest week for ‘event risk’ in many years. I suppose we could also call it ‘event reward,’ who knows?” quipped technical analyst Mark Arbeter, president of Arbeter Investments, in a client note.
Indeed, it’s a huge week for earnings with results due out of Microsoft
MSFT,
Apple
AAPL,
Alphabet
GOOGL,
Amazon
AMZN,
and Meta Platforms
META,
as investors also prepare for a Fed interest-rate decision, jobs market data and the Treasury’s quarterly refunding.
See: Stock-market rally faces Fed, tech earnings and jobs data in make-or-break week
“For a data dependent Fed, and one that still needs to reclaim its inflation fighting credibility, the likely response will be to continue to guide away from a March rate cut, but also remind us the Fed will be willing to act if need be — i.e., retain optionality,” said Richard de Chazal, a macro analyst at William Blair. “We should also expect to get a little more flesh on the bone with regard to the timing of the [quantitative tightening] tapering program.”
De Chazal added that earnings so far haven’t been too impressive — earnings for the 124 S&P 500 companies that have reported so far are up 2.3% vs. expectations of a 1.2% increase, which is below the average gap of 4.4 percentage points.
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There are also geopolitical worries after an attack killed three U.S. soldiers and injured 34 more in Jordan. Oil futures
CL00,
were trading under $78 a barrel, while gold
GC00,
rose and the yield on the 10-year Treasury
BX:TMUBMUSD10Y
fell. Yields move in the opposite direction to prices.
Meanwhile, with the S&P 500, S&P 100
OEX
and Nasdaq-100 tracking QQQs
QQQ
at all-time highs, there’s no “chart resistance or overhead supply above current prices,” Arbeter wrote.
“In other words, everyone invested in these indices is sitting with a profit,” Arbeter wrote. “Most of the great stock market gains come after indexes and individual stocks break out to ATH’s (all-time highs). These mega cap indices have created what we call a platform from which to march higher.”
At the same time, it would be remiss not to express worries about overbought technical conditions, divergent momentum, overbought breadth and some sentiment indicators “that are certainly stretched,” he said.
Companies in focus
-
Amazon.com Inc.
AMZN,
+0.09%
and Roomba parent iRobot Corp.
IRBT,
-8.97%
said Monday they are scrapping their planned acquisition agreement because they believe there’s no path to regulatory approval in the European Union. Shares of iRobot tumbled more than 13%. -
Shares of REV Group Inc.
REVG,
+5.49%
soared 5.5% after the maker of electric- and hydrogen-pwered commercial vehicles said it would pay out a special dividend with the cash generated by strategic actions, including winding down its transit bus manufacturing business. -
Tesla Inc.
TSLA,
+2.39%
expects capital spending to exceed $10 billion in 2024 and to range from $8 billion to $10 billion for each of the following two fiscal years, according to the electric-vehicle maker’s 10-K annual report filing with the Securities and Exchange Commission published on Monday. Tesla shares were up 0.9%.
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