By Stephen Culp
NEW YORK (Reuters) – Wall Street advanced on Monday, building on last week’s gains as signs of economic weakness suggested the effects of the Fed’s aggressive policy aimed at cooling the economy, thereby curbing decades-high inflation, are beginning to be felt.
All three major U.S. stock indexes were higher at the top of a week jam-packed with high profile corporate earnings and crucial economic data.
A report from S&P Global showed a contraction in business activity this month, offering a hint that the Federal Reserve’s barrage of steep interest rate hikes are having their desired effect, raising hopes that the central bank could begin slowing the pace of increases to the Fed funds target rate.
“We’re getting some follow-through from what we saw last week, this idea that while the Fed might not be pivoting, perhaps the cadence could be slowing in terms of rate hikes,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “There seems to be some idea that the rate environment is not going to be as aggressive as we move into next year.
“That idea seems to be causing investors to put money back into the market,” Carlson added.
The Dow Jones Industrial Average rose 374.23 points, or 1.2%, to 31,456.79, the S&P 500 gained 34.73 points, or 0.93%, to 3,787.48 and the Nasdaq Composite added 40.21 points, or 0.37%, to 10,899.92.
Among the 11 major sectors in the S&P 500, healthcare was enjoying the largest percentage gain.
Tesla Inc dropped 3.4% after the electric automaker cut prices for its Model 3 and Model Y cars by as much as 9% in China, signaling softening demand in the world’s largest auto market.
U.S.-listed shares of Chinese companies such as Pinduoduo, JD.com and Baidu Inc slid between 14% and 26% as President Xi Jinping introduced the new Politburo Standing Committee stacked with loyalists.
Third quarter earnings season shifts into overdrive this week. So far, nearly one-fifth of the companies in the S&P 500 have reported. Of those, 74.7% have delivered consensus-beating results, according to Refinitiv data.
Analysts expect S&P 500 earnings growth of 3.0%, on aggregate, down from 4.5% at the beginning of the month, per Refinitiv.
Results from a slew of heavy-hitting tech and tech-adjacent companies are likely to dominate the earnings chatter this week.
Twitter Inc kicks things off on Monday, with Microsoft Corp and Alphabet Inc following on Tuesday. On Wednesday, Apple Inc and Meta Platforms Inc step up to the plate, with Amazon.com wrapping up the FAANGs on Thursday.
High-rolling industrials are also expected to post earnings this week, including United Parcel Service, Boeing Co, Ford Motor Co, 3M Co, General Motors Co, Chevron and Exxon Mobil.
Advancing issues outnumbered declining ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored decliners.
The S&P 500 posted 21 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 58 new highs and 297 new lows.
(Reporting by Stephen Culp; Additional reporting by Bansari Mayur Kamdar and Amruta Khandekar in Bengaluru; editing by Grant McCool)
