U.S. stocks were mostly higher in cautious trade Monday, kicking off a busy week that includes midterm elections that will determine control of Congress, as well as economic data that includes the latest read on inflation as third-quarter corporate earnings season hits the home stretch.
How are stocks trading
- The Dow Jones Industrial Average DJIA, +0.63% was up 172 points, or 0.5%, at 32,575.
- The S&P 500 SPX, +0.32% rose 7 points, or 0.2%, to 3,777.
- The Nasdaq Composite COMP, -7.14% was off 13 points, or 0.1%, at 10,463.
Stocks fell last week, with the Dow losing 1.6%, the S&P 500 down 2.5% and the Nasdaq Composite dropping 3.4%.
What’s driving markets
Stocks of late have continued to be primarily in a negative thrall to expectations of the Federal Reserve’s rate rise trajectory. But traders on Monday showed signs of shrugging off such concerns.
The Fed last week delivered a 75 basis point, or 0.75 percentage point, rise in the fed-funds rate, as expected, and signaled future rate moves might be smaller. Fed Chair Jerome Powell, however, emphasized that rates would need to move higher than Fed officials had previously expected and signaled they may remain elevated.
The stock market’s fall rebound saw its first serious challenge last week, said Chris Larkin, managing director for trading at E-Trade from Morgan Stanley, in emailed comments.
“Some investors were seemingly disappointed in the Fed’s reluctance to seem too dovish, too soon in its inflation fight. This week’s midterm elections may have some bulls hoping for another midterm election market tendency to play out,” he said.
He noted that while the market has followed the historical playbook of underperformance in the first 10 months of midterm election years, the companion tendency is that it has experienced better-than-average returns in the 12 months after the midterms.
Read: What midterms mean for the stock market’s ‘best 6 months’ as favorable calendar stretch gets under way
Cleveland Fed President Loretta Mester and Boston Fed President Susan Collins were due to speak Monday afternoon, while Richmond Fed President Tom Barkin was scheduled to deliver remarks on inflation in the evening.
Barkin and Collins both spoke publicly on Friday. Barkin argued for slowing the pace of rate hikes, but like Collins and Fed Chair Jerome Powell, signaled that it’s unclear just how high rates will have to go to squelch inflation.
Barkin also noted that by the time the Fed gathers for its December policy decision it will have seen two more consumer prices reports, the first coming this Thursday.
Reid added that although his base case was that 2023 would be “a bad year for the global economy and risk, in every 12-month period post-midterms over the last century, the equity market has always gone up with the inflection point being immediately after midterms.”
Meanwhile, a positive turn for Asian markets provided some support, analysts noted. The Hang Seng HSI, +2.69% climbed nearly 3%.
Chinese leaders are weighing steps toward reopening after nearly three years of tough pandemic restrictions but are proceeding slowly and have set no timeline, The Wall Street Journal reported Monday, citing people familiar with the discussions.
However, shares of Apple Inc. AAPL, -0.88% were down 1% after it warned of problems with production of the iPhone 14 in China.
See: Will Apple’s latest production issues destroy demand?
Through Friday, 85% of companies in the S&P 500 had reported third-quarter results. Of those, 73 had issued fourth-quarter guidance, and 50 of those — 68% — missed expectations with their holiday guidance, higher than the 5- and 10-year historical averages, FactSet senior earnings analyst John Butters said in a note.
The S&P 500 is now expected to report a year-over-year earnings decline in the fourth quarter, after forecasts from the current earnings season sent expectations from a 0.2% gain to a 1% decline last week, according to FactSet. Should that forecast hold, along with expectations for growth in the third quarter, it would break an eight-quarter pandemic-era streak of earnings gains.
Earnings Watch: The end of the pandemic earnings boom is in sight as holiday forecasts disappoint
Companies in focus
- Shares of Facebook parent Meta Platforms Inc. META, +6.34% rose 3.3%. The Wall Street Journal reported the company plans to start large-scale layoffs this week — the first major cuts in the company’s 18-year history.
- VillageMD announced Monday an agreement to buy urgent-care provider Summit Health-CityMD in a deal valued at $8.9 billion, with help from investments from Walgreens Boots Alliance Inc. WBA, +2.91% and Cigna Corp. CI, +1.21% affiliate Evernorth. As part of the deal, drugstore and healthcare services company Walgreens will invest $3.5 billion worth of equity and debt, and will remain the largest shareholder of VillageMD with 53% ownership. Walgreens shares were up 2.3%.
- Palantir Technologies Inc. PLTR, -11.35% came in just above expectations with its latest quarterly revenue performance while raising its outlook on an earnings metric Monday. Palantir posted adjusted earnings per share of 1 cent, whereas analysts were expecting 2 cents. Shares fell nearly 10%.