By David French and Lisa Pauline Mattackal
(Reuters) -Wall Street advanced on Monday, with both the S&P 500 and the Dow scaling fresh intraday record highs, as investors bought into technology stocks ahead of a busy week packed with corporate earnings and crucial economic data.
The impending flood of new data points from corporate America will help investors assess the health of the U.S. economy, and whether companies can continue to justify stretched stock market valuations.
Investors are keeping an eye on economic numbers that will help shape the thinking of the U.S. Federal Reserve towards its interest-rate cutting policy - the dominant theme this year.
On a somewhat subdued day for trading, given bond markets were shut due to the federal holiday, U.S. equities maintained the upward momentum from Friday, when both the S&P 500 and Dow Jones Industrial Average notched record closes after major banks kicked off the third-quarter corporate earnings season on a positive note.
Monday's gains were driven by chip stocks, with an index of semiconductor companies jumping 1.8% to a more than two-month high, led by Nvidia's 2.9% rise. Among other growth stocks, Apple and Microsoft gained 1.2% and 0.8%, respectively.
"There's a continued belief that the economy continues to move forward, albeit slowly, and optimism that third-quarter earnings are going to be good and probably hopefully better than expected," said Robert Pavlik, senior portfolio manager, Dakota Wealth Management.
"People are moving back into these megacap tech names that had been left out as people were looking for the rotation trade."
At 02:00 p.m. Eastern time, the S&P 500 was up 40.40 points, or 0.68%, to 5,855.43 points, while the Nasdaq Composite had gained 156.11 points, or 0.85%, to 18,499.04. The Dow Jones Industrial Average rose 147.88 points, or 0.34%, to 43,011.74.
For the Dow, it was the first time that it has breached 43,000 points. Gains on the benchmark, however, were kept in check by a 1.8% drop in Caterpillar, following a brokerage downgrade, and a 1.5% fall in Boeing after the planemaker flagged a larger-than-expected Q3 loss on Friday.
Energy shares fell 0.1%, tracking lower oil prices. [O/R]
However, the rest of the S&P 500 sectors were in positive territory, led by the 1.4% increase in the information technology index.
Bank earnings may have boosted hopes that solid results could help stocks continue their strong 2024 run. However, with stock valuations stretched - the S&P 500 is trading at 21.8 times forward earnings, versus a long-term average of 15.7 - companies might struggle to satisfy investors.
October marks two years since the end of the last bear market in 2022, with the S&P 500 up more than 63% since its Oct. 12, 2022 close.
Forty-one S&P 500 companies are expected to report results this week. Year-over-year third-quarter earnings growth for the S&P 500 is estimated at 4.9%, according to data compiled by LSEG on Friday.
Investors will also watch for crucial economic data, notably the September retail sales figures, for clues on the financial health of U.S. consumers.
Meanwhile, Minneapolis Fed President Neel Kashkari said he sees modest interest-rate cuts ahead as inflation hovers near the central bank's 2% target. Fed Governor Christopher Waller is also scheduled to speak later in the day.
Bets on a 25-basis-point reduction at the Fed's November meeting stood at 86.1%, according to the CME Group's FedWatch tool, as traders dialed back expectations of an outsized cut.
U.S.-listed shares of Chinese firms dropped, with Alibaba down 2% and PDD Holdings losing 6.1%, as investors were left guessing at the size of the overall fiscal stimulus China announced on Saturday.
(Reporting by Lisa Mattackal and Purvi Agarwal in Bengaluru and David French in New York; Editing by Pooja Desai and Aurora Ellis)
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