The S&P 500 set a new record to start the week, climbing 0.7% as investors anticipated key corporate earnings that could dictate the market's next moves. The Nasdaq Composite also saw gains, rising 1%, while the Dow Jones Industrial Average slightly lagged with a modest increase of 0.1%. The Dow's progress was hindered by a notable 3% drop in Caterpillar shares following a downgrade by Morgan Stanley.
Now, the S&P 500 is up 22% year to date, marking two years of bull market conditions that have seen the index rally almost 63% since its last major dip in October 2022.
A swing of major companies, including Bank of America (BAC, Financial), Goldman Sachs (GS, Financial), and Johnson & Johnson (JNJ, Financial), are poised to release their earnings on Tuesday, with Morgan Stanley (MS, Financial) and United Airlines (UAL, Financial) following suit on Wednesday. The earnings season continues with Walgreens Boots Alliance (WBA, Financial), Netflix (NFLX, Financial), and Procter & Gamble (PG, Financial) later in the week.
These forthcoming reports build on the momentum from JPMorgan Chase (JPM, Financial) and Wells Fargo (WFC, Financial), whose positive results propelled the S&P 500 to close above 5,800 for the first time last Friday. To date, 30 S&P 500 companies have surpassed earnings expectations by approximately 5% on average, signaling a stronger performance than last quarter's 3% average beat.
Despite these gains, the market's sentiment is cautious amidst rising Treasury yields and escalating geopolitical tensions in the Middle East. With the U.S. presidential election just three weeks away, analysts like Baird's Ross Mayfield suggest that market volatility could re-emerge. Yet, over a longer horizon, the outlook remains optimistic due to low interest rates, a potential soft landing for the economy, and continued earnings growth.
