Dow pulls back from last week’s records but retains grip on 34,000

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Stocks pulled back modestly early Monday, after the Dow Jones Industrial Average and S&P 500 ended last week at all-time highs as investors struggled for reasons to push equity benchmarks to new heights.

What are major indexes doing?

  • The Dow Jones Industrial Average fell 114 points, or 0.3%, to 34,082.
  • The S&P 500 slid 7 points, or 0.2%, to 4,179.
  • The Nasdaq Composite Index fell 22 points, or 0.2%, to 14,031.

The Dow and S&P 500 closed at records on Friday, while the Nasdaq Composite booked its second-highest finish of all time. For the week, the Dow rose 1.2%, while the S&P 500 gained 1.4% and the Nasdaq Composite advanced 1.1%. It was the fourth straight weekly rise for the Dow and S&P 500, while the Nasdaq booked its third consecutive weekly gain.

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What’s driving the market?

Though equities Monday morning looked to be taking a breather from last week’s record advance Monday, analysts said the tone remained constructive given a lack of any major negative catalysts.

Read: Stocks are at all-time highs and the U.S. economy is booming. So why is everyone so freaked out?

“Overall, it looks like clear skies for equity markets. Policy makers are still holding investors by the hand and vaccination programs have accelerated dramatically,” said Marios Hadjikyriacos, investment analyst at XM, in a note.

Half of all adults in the U.S. have received at least one COVID-19 shot, the Centers for Disease Control and Prevention reported Sunday, as the vaccination campaign hit another milestone.

“The only real risks on the radar are excess inflation that leads the Fed to shift gears abruptly, some new vaccine-resistant variant, or the geopolitical temperature rising further in critical theaters like Ukraine or Taiwan,” Hadjikyriacos said.

Stocks received a lift last week as earnings season got under way with solid results from big banks and as investors digested strong economic data.

Investors continue to watch the debate around President Joe Biden’s infrastructure plan, including his call to raise the corporate tax rate from 21% to 28%. Axios reported Sunday that resistance among Senate Democrats was likely to limit a rise in the tax rate to 25%, which would raise $600 billion over 15 years and come in well short of offsetting the price tag of the eight-year $2.25 trillion package.

Investors are gearing up for a fresh round of earnings, with 81 S&P 500 companies, including 10 components of the Dow, set to deliver results.

“The heaviest period for earnings reports is this week and next. Obviously, recent market strength suggests high expectations. How companies perform relative to those expectations will determine the course of stock prices over the near term,” said James Meyer, chief investment officer at Tower Bridge Advisors.

Which companies are in focus

  • Dow component Coca-Cola Co. reported earnings and revenues Monday that topped Wall Street forecasts. Shares were up slightly.
  • GameStop Corp. shares surged after the videogame retailer said Chief Executive George Sherman will step down no later than July 31, after two years in the role.
  • Shares of electric-vehicle maker Tesla Inc. were down 2.6%. Two men died after a Tesla vehicle that authorities said was believed to be operating without anyone in the driver’s seat crashed into a tree Saturday night north of Houston.
  • Harley-Davidson Inc. shares surged more than 8% after the motorcycle maker roared past first-quarter earnings forecasts. Separately, the company said it had received notification it would be subject to a 56% tariff on European Union imports. Harley-Davidson said it would launch an immediate legal challenge.
  • Herman Miller Inc.  and Knoll Inc.  announced an agreement Monday to combine in a cash-and-stock deal valued at $1.8 billion that will create a leader in modern design for the home and office. Knoll shareholders would receive $11 in cash and 0.32 shares of Herman Miller for each share owned, equal to a premium of 45% over Knoll’s closing price on Friday. Herman Miller shares fell, while Knoll shares jumped.
  • Peloton Interactive Inc. said Monday that a recent warning to consumers from the U.S. Consumer Product Safety Commission to stop using its Tread+ product was “inaccurate and misleading.” The CPSC said over the weekend issued an “urgent warning” about the Tread+ machines after multiple reports of small children and pets being injured beneath the machines, including one death. Peloton shares were down.

How are other assets faring?

  • The 10-year Treasury note yield rose 3 basis points to 1.604%, near where it finished at the end of last week. Bond prices move inversely to yields.
  • Gold futures were up 0.2% to $1,783.20 on Comex. Meanwhile, U.S. benchmark crude futures fell 0.3% to $62.94 a barrel.
  • The Japanese Nikkei finished flat on Monday. The U.K.’s FTSE 100 and Stoxx Europe 600 were both heading for slight gains.
  • The U.S. dollar tumbled 0.5% against its major rivals, based on trading in the ICE U.S. Dollar Index
  • Bitcoin was up 1.5% near $57,076 after a volatile weekend that saw the cryptocurrency trade as low as $51,907 Sunday, down around 20% from a recent peak of $64,829.14, according to CoinDesk.

Need to Know: Forget bitcoin’s weekend slump: Watch these 2 key levels for what happens next, strategist says

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