S&P 500, Dow notch fresh record highs with earnings, economic data in focus

By Lisa Pauline Mattackal and Purvi Agarwal

(Reuters) -Wall Street rose on Monday, with the S&P 500 and the Dow touching fresh intraday record highs, as investors geared up for a week packed with corporate earnings and crucial economic data that will likely test stretched stock market valuations.

Chip stocks drove gains on the S&P 500 and the Nasdaq, with the benchmark index building on the record close it notched on Friday after major banks kicked off the third-quarter corporate earnings season on a positive note.

An index of semiconductor companies jumped 1.5% to a more than two-month high, led by Nvidia (NASDAQ:NVDA)’s 2.5% rise. Among other growth stocks, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) gained 1.1% and 0.9%, respectively.

“There’s a continued belief that the economy continues to move forward, albeit slowly, and optimism that third-quarter earnings are going to be good and probably hopefully better than expected,” said Robert Pavlik, senior portfolio manager, Dakota Wealth Management.

“People are moving back into these megacap tech names that had been left out as people were looking for the rotation trade.”

The Dow Jones Industrial Average rose 180.04 points, or 0.42%, to 43,043.90, the S&P 500 gained 40.05 points, or 0.69%, to 5,855.08, and the Nasdaq Composite gained 145.85 points, or 0.80%, to 18,488.79.

Gains on the Dow, however, were kept in check by a 1.5% drop in Caterpillar (NYSE:CAT), following a brokerage downgrade, and a 0.7% fall in Boeing (NYSE:BA) after the planemaker flagged a larger-than-expected Q3 loss on Friday.

Energy shares fell 0.2%, tracking lower oil prices. [O/R]

Bank earnings may have boosted hopes that solid results could help stocks continue their strong 2024 run. However, with stock valuations stretched – the S&P 500 is trading at 21.8 times forward earnings, versus a long-term average of 15.7 –

companies might struggle to satisfy investors.

October marks two years since the end of the last bear market in 2022, with the S&P 500 up more than 63% since its Oct. 12, 2022 close.

Forty-one S&P 500 companies are expected to report results this week. Year-over-year third-quarter earnings growth for the S&P 500 is estimated at 4.9%, according to data compiled by LSEG on Friday.

Investors will also watch for crucial economic data, notably the September retail sales figures, for clues on the financial health of U.S. consumers.

Meanwhile, Minneapolis Fed President Neel Kashkari said he sees modest interest-rate cuts ahead as inflation hovers near the central bank’s 2% target. Fed Governor Christopher Waller is also scheduled to speak later in the day.

Trading was somewhat subdued on the day, as bond markets closed for a holiday.

Bets on a 25-basis-point reduction at the Fed’s November meeting stood at 86.1%, according to the CME Group’s (NASDAQ:CME) FedWatch tool, as traders dialed back expectations of an outsized cut.

U.S.-listed shares of Chinese firms dropped, with Alibaba (NYSE:BABA) down 1.2% and PDD Holdings losing 4.6%, as investors were left guessing at the size of the overall fiscal stimulus China announced on Saturday.

Advancing issues outnumbered decliners by a 1.21-to-1 ratio on the NYSE, and by a 1.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 73 new 52-week highs and one new low, while the Nasdaq Composite recorded 123 new highs and 59 new lows.