Major U.S. equity benchmarks surpassed previous closing records on Monday, as investors looked ahead to one of the busiest weeks of earnings season and digested a spree of acquisition deals.
What are major benchmarks doing?
- The Dow Jones Industrial Average DJIA, +0.06% rose 26 points, or 0.1%, to 34,068.
- The S&P 500 SPX, +0.22% gained 98 points, or 0.2%, to 4,189, exceeding its previous closing all-time high of 4,185.47 on April 16.
- The Nasdaq Composite COMP, +0.63% added 74 points, or 0.5%, to 14,092, above its record finish of 14,095.47 hit February 12.
On Friday, stocks bounced back from a selloff the previous session triggered by reports President Joe Biden planned to push for a sharp rise in the capital-gains tax rate for Americans earning more than $1 million a year. Major benchmarks still suffered weekly losses, with the Dow DJIA, +0.06% down 0.5%, the S&P 500 SPX, +0.22% off 0.1% and the Nasdaq Composite COMP, +0.63% losing 0.3%.
What’s driving the market?
Investors are going through another busy week of what’s, so far, been an upbeat earnings season, with 181 S&P 500 companies, including 10 Dow components, reporting results. Investors will hear from tech heavyweights, with results due after the bell Monday from electric car maker Tesla Inc. TSLA, +1.26% followed later in the week by Microsoft Corp. MSFT, +0.06%, Apple Inc. AAPL, +0.19%, Google parent Alphabet Inc. GOOG, +0.80% GOOGL, +0.77%, Facebook Inc. FB, +0.36% and Amazon.com Inc. AMZN, +0.23%.
“This week and next will provide the bulk of the remaining earnings. So far, results have far exceeded expectations. However, that hasn’t translated into a further surge in stock prices. That supports the notion that even though analysts underestimated the power of the recovery, investors did not,” said James Meyer, chief investment officer at Tower Bridge Advisors, in a Monday note.
Through Friday, a quarter of S&P 500 companies had reported first-quarter results, leaving the index with the highest year-over-year growth in earnings since the third quarter of 2010, according to John Butters, senior earnings analyst at FactSet.
Analysts also expect double-digit earnings growth for the remaining three quarters of 2021, he noted. Above-average growth rates are due to a combination of higher earnings for 2021 and an easier comparison to weaker earnings in 2020 due to the negative impact of COVID-19 on numerous industries, he said.
And in a sign of the growing optimism and certainty around the economic backdrop, more companies were announcing merger and acquisition deals on Monday.
The Federal Reserve’s two-day policy meeting, which concludes Wednesday, will be in the spotlight, though policy makers aren’t expected to make any material changes to monetary policy.
A stronger economic backdrop since the last Fed meeting will likely be acknowledged, but investors shouldn’t “read into that more than what it is — a reasonable marking to market of where we are at the moment,” wrote economists at RBC Capital Markets, in a note.
At his Wednesday news conference, Powell’s tone is also unlikely to change much, the analysts said. While the chairman’s assertions that rates are unlikely to be lifted before 2022 will probably be challenged over the coming year, Powell is likely to stick to his position, they said.
Data on March durable-goods orders rose 0.5% last month, falling short of forecasts for a 2.2% increase from February.
The slide in business investments reflected a sharp decline in commercial and military aircraft sales but also pointed to the impact of shortages of supplies and raw materials that have gummed up supply chains.
Which companies are in focus?
- U.S. health officials on Friday lifted an 11-day pause on Johnson & Johnson JNJ, -0.78% vaccinations following a recommendation by an expert panel. Shares of the drugmaker fell 0.7%.
- Otis Worldwide Corp. OTIS, +6.04% shares gained 6.1% after the elevator and escalator manufacturing and services company easily topped estimates for the first quarter and raised its full-year guidance.
- Shares of Tesla Inc. TSLA, +1.26% will be in focus as it reports results after the bell.
- Shares of Flagstar Bancorp Inc. FBC, +8.07% shot up 7.4%, after the Michigan-based bank announced an agreement to be acquired by New York Community Bancorp. Inc. NYCB, +4.30% in a stock deal valued at $2.6 billion.
- W.R. Grace & Co GRA, +6.31% announced Monday an agreement to be acquired by privately held Standard Industries Holdings Inc. in a deal valued at $7.0 billion. Its shares were up over 6.3%.
- Apple Inc. AAPL, +0.19% announced the company intends to make new U.S. investments of $430 billion over five years. Apple shares rose 0.1%.
- Shares of Proofpoint Inc. PFPT, +31.18% rocketed 31% higher after the cybersecurity and compliance company announced an agreement to be acquired by private-equity firm Thoma Bravo in a cash deal that values the company at $12.3 billion.
How are other assets faring?
- The greenback was flat, based on trading in the ICE U.S. Dollar Index DXY, +0.01%.
- June crude futures CL.1, -0.05% fell 0.4% to $61.89 a barrel, while gold GC00, +0.10% was up a touch to $1,778.90 an ounce.
- The 10-year Treasury note yield BX:TMUBMUSD10Y came off its high to trade at 1.574% as investors eyed the midweek Fed meeting.
- Japan’s Nikkei 225 index NIK, +0.36% rose 0.4% and China’s CSI 300 000300, -1.13% fell 1.1%. The Stoxx Europe 600 index SXXP, +0.26% was up 0.3%, while the U.K.’s FTSE 100 UKX, +0.35% rose 0.4%.