Topline
Stocks staged a broad rally Monday, a rare sight recently as confidence has weakened.
Key Facts
The Dow Jones Industrial Average rose 310 points, or 1%, by mid-morning, while the S&P 500 and tech-heavy Nasdaq jumped 0.7% and 0.8%, respectively.
It’s the Dow’s best day in two weeks, marking just the second time the index has gained 1% or more over the last two months, while it’s the first time in two weeks all three indexes gained 0.7% or more.
The jump notably came after the S&P entered correction territory, declining more than 10% from its July peak; the index is now slightly out of correction territory with a 9.5% contraction.
Among Monday’s biggest risers were big technology stocks which dragged down indexes after delivering mixed messages about future performance.Alphabet, Amazon, Meta and Microsoft all rose 2%, driving broader gains.
Also rising Monday were fast food heavyweight McDonald’s and lender SoFi, whose stocks both gained 2% after the two firms both topped analysts’ quarterly profit estimates in their morning earnings report.
Chief Critic
JPMorgan strategists do not buy into the notion that earnings growth will support a sustained rally. The group led by Dubravko Lakos-Bujas wrote to clients Monday that consensus expectations about corporate profits growing 12% over the next year are “divorced” from a host of risks including a decrease in consumer demand due to a decline in household savings and growing interest expenses. JPMorgan has a 4,200 year-end price target for the S&P, about 1% above its current level.
Key Background
After rising more than 20% over 2023’s first seven months, the S&P 500 is now up just 8% for the year. The stock market is reeling from a brutal two-week stretch in which all three major indexes declined 4% or more as investors sold off on lingering concerns about economic and financial conditions. Weighing heavily on stocks was the strength of the bond market tanking to its worst level in nearly two decades due to concerns and the kickoff of third-quarter earnings season. Though it’s been a strong headline earnings season—the S&P’s 7.9% average profit above expectations through Thursday was well above the historic rate of 4.1%, according to LSEG data—worries about future growth have weighed on stocks, evidenced by Meta’s post-earnings nosedive after it cautioned about advertising spending due to the war between Israel and Hamas.
What To Watch For
About a quarter of S&P companies (23.2%) will report earnings this week, according to Morgan Stanley research. The most anticipated release will come Wednesday afternoon, when the world’s most valuable company, Apple, will disclose results.
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