Stocks fluctuated near their all-time highs as traders looked ahead to the start of the earnings season and inflation data that will be key in shaping the Federal Reserve outlook.
Most companies in the S&P 500 rose despite renewed losses in chipmakers. With Corporate America navigating one of the strongest profit cycles in recent history, equities have also defied concerns about elevated energy costs and bond yields. Brent crude climbed to around $107 a barrel. Treasury futures were little changed, with the cash market closed for Columbus Day.
The bull market in stocks is completing its fourth anniversary, with Wall Street gearing up for a high-stakes earnings season that will be crucial to sustaining the rally. Profit resilience helps explain why stocks have remained so strong even as the macro backdrop grows more challenging, according to Bret Kenwell at eToro.
“Growth has been powerful enough to keep valuations in check and allow investors to look past higher yields, interest rates, and inflation,” he noted. “Another strong quarter could reinforce the bull narrative intact into year-end, while a disappointment could catalyze a broader pullback.”
The market may be susceptible to negative surprises, but the fact that it has continued to reach new highs amid challenges highlights the strength of longer-term artificial-intelligence tailwinds, said Chris Larkin at E*Trade from Morgan Stanley.
“Earnings growth remains supportive for equities and the recent valuation de-rating has improved asymmetry into the third-quarter earnings season,” said Goldman Sachs Group Inc. strategists led by Christian Mueller-Glissmann. They raised their three-month view to overweight from neutral.
S&P 500 firms are estimated to post a 25% jump in profits compared with a year earlier, according to data compiled by Bloomberg Intelligence. A Citigroup Inc. model sees a larger share of US companies beating estimates this quarter than in the previous one, led by technology, healthcare and mining.
The earnings season gets underway Tuesday, when Goldman Sachs, JPMorgan Chase & Co., Citigroup and Wells Fargo & Co. report results. Bank of America Corp. and Morgan Stanley’s figures are due on the following day.
“The big banks tend to set the stage for the rest of earnings season largely since their performance reveals how the underlying economy is doing, and a strong economy is the key to a healthy earnings season,” said Clark Bellin at Bellwether Wealth.
Meantime, this week’s consumer price index is likely to be the most-important release of data the Fed will see before its October meeting, according to Jason Pride and Michael Reynolds at Glenmede. Barring a stronger-than-expected reading, the central bank will probably take a patient approach to its next rate hike, they said.
Corporate Highlights:
- Microsoft Corp. · is gearing up to install the latest version of its own chips in data centers, with the aim of powering its AI software using mostly homegrown hardware.
- Adobe Inc. fell after Wells Fargo Securities downgraded the maker of software for creative professionals by two notches, to underweight from overweight.
- Salesforce Inc. rose after Bank of America Corp. raised the recommendation on the software company to buy from underperform, pointing to tailwinds from AI adoption.
- Starbucks Corp. · said it’s not buying Chipotle Mexican Grill Inc., seeking to tamp down speculation about what could have been one of the restaurant sector’s largest-ever deals.
- Bristol Myers Squibb Co. ’s experimental drugs for treating a rare endocrine cancer and a deadly form of lung disease showed promise in late-stage studies, a potential boon for the pharmaceutical company’s new product pipeline.
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Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 11 a.m. New York time
- The Nasdaq 100 fell 0.6%
- The Dow Jones Industrial Average rose 0.5%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World Index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.1173
- The British pound fell 0.1% to $1.3219
- The Japanese yen fell 0.2% to 158.68 per dollar
Cryptocurrencies
- Bitcoin fell 1.3% to $82,503.26
- Ether fell 0.6% to $2,520.93
Bonds
- The yield on 10-year Treasuries was little changed at 5.24%
- Germany’s 10-year yield was little changed at 3.48%
- Britain’s 10-year yield was little changed at 5.45%
Commodities
- West Texas Intermediate crude rose 2.1% to $93.82 a barrel
- Spot gold fell 0.7% to $4,163.72 an ounce