The S&P 500 and Nasdaq ended higher on Monday, rising for a fourth straight day to add to gains after the S&P 500's best week since July. Investors weighed concerns over elevated inflation against hopes that more companies will follow the lead of the big banks last week and post strong quarterly earnings results.
The Dow ended the session slightly lower as shares of Disney declined by 3%. The moves in U.S. stocks came amid a drop in overseas equities after China reported its slowest GDP growth rate since last year for the third quarter, as energy shortages and property-sector turmoil dragged down economic activity in the world's second-largest economy. West Texas intermediate crude oil futures (CL=F) hovered at their highest level since 2014, and the benchmark 10-year Treasury yield broke back above 1.6%.
This week, investors are looking ahead to a packed slate of corporate earnings results, which will help offer more insights into how companies across various industries have navigated inflationary trends, widespread labor scarcities and lingering virus-related disruptions. Remarks from some executives have further confirmed the weight of these issues. Fastenal (FAST) CEO Daniel Florness said during last week's earnings call that "product and shipping cost inflation is not just high, it's brutally high."
But an otherwise strong start to earnings season last week helped fuel optimism that corporate profits held up more strongly than anticipated across the board, even in the face of a myriad supply-related challenges. Big banks from Morgan Stanley (MS) to Bank of America (BAC) and Goldman Sachs (GS) handily topped estimates in their third quarter results last week, and many of these companies' executive offered upbeat assessments of the state of the U.S. consumer, or the demand engine of the U.S. economy. These remarks had helped affirm trends seen in recent economic data, with U.S. retail sales unexpectedly posting a monthly gain of 0.9% in September, government data last week showed.
"We started off this week really strong. The banks have done great ... That started to relieve a little bit of people's concerns, especially when you had the CEOs of the bank saying the consumer looks strong," Victoria Fernandez, Crossmark Global Investments chief market strategist, told Yahoo Finance Live on Friday. "And that, I think, is going to be the key for the market going forward. If the consumer is there and they're willing to spend — which we've seen in the month of September [when] retail sales started to come back a little bit — then I think that gives a little more optimism to the market that as we continue to reopen, as earnings are strong, the consumer will be there, and the equity markets will continue to trend higher."
As of Friday, the expected earnings growth rate for the S&P 500 was 30%, according to FactSet. That figure — based on both actual earnings from companies that have reported so far and expectations for future results — represented an increase from the prior week, when the anticipated earnings growth rate for the third quarter stood at about 27.6%.
4:02 p.m. ET: Stocks end mixed; S&P 500 and Nasdaq close higher for a fourth straight session
Here's where the major indexes closed out Monday's session:
S&P 500 (^GSPC): +15.08 (+0.34%) to 4,486.45
Dow (^DJI): -35.62 (-0.1%) to 35,259.14
Nasdaq (^IXIC): +124.47 (+0.84%) to 15,021.81
2:20 p.m. ET: Supply chain issues will be worked out 'sooner than later': Strategist
Supply chain issues and other supply-side constraints have been a primary area of concern for the markets over the past few months, and led to worries about margin compression for major companies. However, according to at least one strategist, these concerns may be overdone.
"I do believe that pessimism coming into earnings season... was overblown," Thomas Hayes, chairman of Great Hill Capital, told Yahoo Finance Live.
"The one thing that we look at as it relates to the supply chain issues is, if these issues were going to persist and be permanent, why would net profit margins be so high? We're going to have 12.3% net profit margin in Q3 while all these issues were happening," he added. "That's the third highest in history, second to the last two quarters. And that 12.3% net profit margin compares to the last five-year average of 10.9%."
"So like Jamie Dimon, the CEO of JPMorgan said last week, he said this is going to be a non-issue as we head into Q1 of 2022," Hayes said. "And this will work itself out ... Our bet is that it's going to be fixed sooner than later."
2:05 p.m. ET: Apple unveils new MacBook Pro with M1 Pro and M1 Max chips, new AirPods
The company debuted 14- and 16-inch MacBook Pro models equipped with new M1 Pro and M1 Max chips, which both comprise upgrades compared to the original Apple-made M1 chip introduced last November. The new laptops can be ordered today and will be available next week, starting at $1,999 for the 14-inch computer and $2,499 for the 16-inch version.
Apple also introduced new entry-level AirPods, which include audio features like Adaptive EQ for a personalized listening experience, a new contour design and water resistance. This product begins at $179, while the previous model of entry-level AirPods was cut to $129.
Other announcements at Apple's event included an Apple Music Voice Plan, or subscription for Apple Music that is only enabled through Siri voice recognition. The voice-only plan costs $4.99, versus $9.99 for the flagship individual plan on Apple Music, and will be available in multiple countries starting later this fall.
12:33 p.m. ET: Investors could see a a new S&P 500 high by year-end: Strategist
Stocks have rallied back after a weak September, with hopes that corporate America will surprise to the upside on earnings helping push equities higher. Persistently accommodative monetary policies from the Federal Reserve have also helped support stocks.
"I think investors are looking at last week's reports from the big financials as a really positive sign for quarter 3, and what we can expect maybe from some other sectors," Jimmy Lee, CEO of The Wealth Consulting Group, told Yahoo Finance Live on Monday. "We saw a positive report also on the retail sales number, and my opinion is that the consumer is going to end up being stronger than a lot of people think coming into December and holiday spending. Of course, a lot of that depends on the supply shortages ... and hopefully as the supply constraints are being resolved, there'll be enough goods for people to spend money on."
"I think we're going to have a really good positive Q3," He added. "It's very tough to fight against low interest rates, and I think equity prices continue to go higher. And maybe we see new highs before year-end."
11:31 a.m. ET: Homebuilder sentiment unexpectedly jumped in October: NAHB
Optimism among U.S. homebuilders posted a surprise jump in October, with strong demand for homes helping offset ongoing supply chain and labor issues in the housing market.
The National Association of Home Builders' October Housing Market Index jumped to 80 in October from 76 in September. This index, which tracks confidence among domestic homebuilders, was expected to fall to 75 in the latest reading, according to Bloomberg consensus data. At 80, the index came in above the average of 70 throughout 2020 and 66 in 2019.
“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” NAHB Chairman Chuck Fowke said in a press statement.
“Building material price increases and bottlenecks persist and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt. Policymakers must focus on fixing the broken supply chain," Fowke added. "This will spur more construction and help ease upward pressure on home prices.”
9:30 a.m. ET: Stocks open lower, giving back some gains
Here's where markets were trading after the opening bell Monday morning:
S&P 500 (^GSPC): -18.85 (-0.42%) to 4,452.52
Dow (^DJI): -158.64 (-0.45%) to 35,136.12
Nasdaq (^IXIC): -62.33 (-0.42%) to 14,836.02
Crude (CL=F): +$0.83 (+1.01%) to $83.11 a barrel
Gold (GC=F): -$0.90 (-0.05%) to $1,767.40 per ounce
10-year Treasury (^TNX): +2.9 bps to yield 1.605%
7:58 a.m. ET: Bitcoin prices hover near six-month high as first-ever bitcoin futures ETF readies for launch
Bitcoin (BTC) prices hovered around $60,700 Monday morning after breaking above the $60,000 mark for the first time since April last week.
The jump came alongside reports that the Security and Exchange Commission was unlikely to block a new futures-based bitcoin exchange-traded fund (ETF) from launching on the New York Stock Exchange on Tuesday. ETF-provider ProShares confirmed to the New York Times on Monday that the fund will launch as planned, making it the first-ever bitcoin futures ETF on the public exchange. The ETF will offer investors exposure to bitcoin futures contracts, allowing them to bet on expected price changes rather than on the spot crypto prices themselves.
7:35 a.m. ET Monday: Stock futures point to a lower open
Here's where markets were trading before the opening bell Monday morning:
S&P 500 futures (ES=F): -10.25 points (-0.23%), to 4,452.25
Dow futures (YM=F): -91 points (-0.26%), to 35,080.00
Nasdaq futures (NQ=F): -26.50 points (-0.18%) to 15,108.00
Crude (CL=F): +$1.35 (+1.64%) to $83.63 a barrel
Gold (GC=F): -$3.90 (-0.22%) to $1,764.40 per ounce
10-year Treasury (^TNX): +1.9 bps to yield 1.595%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter