Dow, S&P 500 and Nasdaq end at records ahead of Big Tech earnings, Fed meeting
By William Watts and Joy Wiltermuth
U.S. stock benchmarks closed at back-to-back records Monday, as investors await earnings this week from corporate heavyweights, including from Big Tech, and a Federal Reserve policy meeting.
The pipeline of earnings could set the tone, analysts said, but investors also will be focused on China and the U.S. as tensions rise between the world's top two economies.
How did major indexes perform?
U.S. benchmarks bounced back sharply last week from a July 19 tumble to end Friday at records. The S&P 500 on Friday rose 2% to finish at its 40th record close of 2021, and the tech-heavy Nasdaq Composite rose 2.8%. The Dow also pushed to a record close Friday, finishing above the 35,000 milestone (https://www.marketwatch.com/story/dow-clears-35-000-milestone-on-friday-on-6th-try-11627073280) for the first time.
What driving the market?
U.S. stocks rallied to fresh intraday and closing records Monday, shaking off a softer tone across global equity markets as investors waited to hear from the C-suites of Big Tech companies about their expectations for the rest of 2021.
"It's all about earnings this week," said John Carey, director for equity income at Amundi U.S., adding that investors will be glued to what company executives have to say about their expectations for the second half of this year.
"I think investors will also be especially attuned to anything management has to say about inflation, cost pressures and the margin outlook, as a result of potentially rising labor costs and other inputs," he told MarketWatch.
Results are due this week from major tech companies including
Earnings Preview: Apple, Microsoft, Google, Facebook, Amazon and Tesla headline the biggest week of earnings (https://www.marketwatch.com/story/the-main-attractions-arrive-apple-microsoft-google-facebook-amazon-and-tesla-headline-the-biggest-week-of-earnings-11627254964)
"The earnings season is now in full throttle and thus far continues to surprise to the upside, as most companies are reporting better than expected top and bottom-line results," said Peter Cardillo, chief market economist at Spartan Capital Securities, in a note.
The U.S. earnings calendar also includes electric-vehicle maker Tesla Inc.(TSLA), which reported after the close on Monday (https://www.marketwatch.com/story/tesla-q2-sales-nearly-double-stock-rises-11627330558?mod=mw_latestnews).
"Folks are non-committed to jumping in front of the big earnings we have on for this week," said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management. "Earnings are not the concern. It's the market's reaction to earnings."
But Pavlik also expects investors to focus on the outcome of the Federal Reserve's two-day policy meeting, particularly if the delta variant of the coronavirus that causes COVID-19 begins to weigh down the central bank's plans to eventually tighten its extremely accommodative monetary policies.
"If this trend continues with the COVID variant this fall and winter, the Fed may not be able to raise interest rates [in 2023] as much as they want to, unless the economy really picks up steam," he told MarketWatch.
Don't miss:Stagflation is 'a legitimate risk' that would be painful for U.S. markets (https://www.marketwatch.com/story/stagflation-is-a-legitimate-risk-that-would-be-painful-for-u-s-markets-11627093835?mod=christine-idzelis)
The Fed meets Tuesday and Wednesday. Policy makers are expected to discuss plans around eventually slowing the pace of the Fed's monthly bond purchases. But investors expecting clear answers about the crucial questions of when the tapering will start and the pace of any pullback will likely be disappointed, economists said.
See:Fed to tiptoe toward tapering this week (https://www.marketwatch.com/story/fed-to-tiptoe-towards-tapering-next-week-11627061356?mod=article_inline)
In Washington, the Biden administration on Monday (https://www.marketwatch.com/story/white-house-remains-confident-about-infrastructure-deal-psaki-says-2021-07-26?mod=bnbh_mwarticle) said it was confident that a bipartisan infrastructure deal still can be worked out, despite setbacks over the weekend.
Global stocks in Europe and the U.K. closed modestly lower, while Hong Kong's Hang Seng skidded over 4%, following a crackdown by China (https://www.marketwatch.com/story/chinas-tencent-ordered-to-end-exclusive-music-contracts-01627151897?mod=mw_quote_news) both on Tencent's music licensing and the entire educational tutoring industry (https://www.marketwatch.com/story/china-blames-u-s-for-stalemate-in-relations-as-high-level-talks-begin-01627268918?mod=home-page). Tencent Music Entertainment (TME) shares fell 3% after dropping as much as 14% in premarket action.
U.S. government data on Monday showed U.S. new home sales fell 6.6% in June (https://www.marketwatch.com/story/sales-of-new-homes-slump-to-the-lowest-level-since-start-of-pandemic-high-costs-and-low-selection-are-to-blame-11627308798?mod=article_inline) to an annual rate of 676,000, the lowest since the first month of the COVID-19 pandemic in early 2020, as high prices and a limited selection appeared to frustrate would-be buyers.
Also read:Goldman Sachs trims U.S. growth outlook due to weaker service sector (https://www.marketwatch.com/story/goldman-sachs-trims-u-s-growth-outlook-due-to-weaker-service-sector-11627312508?mod=mw_latestnews)
Which companies were in focus?
What did other markets do?
Steven Goldstein contributed reporting
-William Watts; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
July 26, 2021 16:28 ET (20:28 GMT)
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