U.S. stocks jumped sharply Monday, propelled higher by a
surge in technology stocks.
The S&P 500 and the Dow Jones Industrial Average climbed
for the fourth consecutive session in midafternoon trading. The S&P 500
rose 1.6%, while Dow rallied 0.9%.
Meanwhile, the Nasdaq Composite surged 2.6%, a move up that
is expected to be enough to push the tech-heavy index out of correction
territory, which it entered in early September. The tech-heavy index is also on
track for its third-highest close in history.
Megacap companies including Apple and Amazon. com were among
the strongest performers, jumping 6.4% and 4.8%, respectively. Apple is set on
Tuesday to unveil a 5G-enabled iPhone, which some investors hope could create
growth similar to the kind seen in the iPhone’s earliest days. Amazon also is
kicking off its Prime Day event of shopping deals Tuesday.
The robust gains build on last week’s advances, during which
U.S. stocks rallied on signs that next month’s presidential election could have
more of a decisive result than originally expected. National polls have showed
a growing lead for former Vice President Joe Biden over President Trump.
This week, election expectations are likely to remain a
focus among traders, though many will also be parsing the beginning of
third-quarter earnings season. Investors are betting that the results will show
corporate performance has turned a corner. With the economy continuing to
slowly reopen, profits of large companies in the S&P 500 are now projected
to record a drop of 20% from a year earlier, an improvement from the 25%
decline anticipated at the end of June.
Other technology companies including Twitter and Facebook
also jumped, with both growing more than 4%.
“The last two weeks were about improving market
[participation]…but today it’s a day focused on technology,” said Keith Lerner,
chief market strategist at Truist/SunTrust Advisory. “With so much uncertainty
about fiscal stimulus out there, it’s natural to see rotation back into the
secular growth stories.
“If you don’t get stimulus, those companies’ growth is
likely to sustain,” Mr. Lerner continued.
Still, Monday’s gains were broad. The materials sector was
the only one of the S&P 500’s 11 industry groups to post a decline in
midafternoon trading. JPMorgan Chase, Johnson & Johnson and Citigroup are
expected to report earnings Tuesday.
This week, investors will be looking for signs from
companies that cost cuts, including layoffs, are behind them, and that business
leaders are confident about the quarters ahead, said Jeffrey Kleintop, chief
global investment strategist at Charles Schwab. He said that traders also will
be looking for any signs that “precautionary cash hoards may turn into
dividends next year.”
“It isn’t so much about the numbers and the degree to which
companies beat estimates,” Mr. Kleintop said. “It’s those words that matter
more and the tone and confidence from business leaders.”
In addition to earnings, traders also will be focused this
week on any signs of progress on stimulus talks. The latest White House offer
on a new coronavirus package hit resistance from both Democrats and Republicans
over the weekend, deflating hopes that an agreement would be struck before Nov.
3.
Still, investors are weighing the possibility that a
Democratic sweep of the presidency and Congress next month could lay the ground
for a large stimulus package to be passed, offering additional relief to
households and businesses, in the early months of next year.
“There is a good chance that we’ve overplayed the volatility
due to the November election,” said Edmund Shing, global head of equity
derivative strategy at BNP Paribas. The Federal Reserve is still “in ‘whatever
it takes’ mode,” and both major parties are committed to more stimulus, though
a bipartisan deal is very unlikely, he said.
Overseas, shares also climbed. The Stoxx Europe 600 gained
0.7%. China’s Shanghai Composite Index closed up 2.6% and Hong Kong’s Hang Seng
Index advanced 2.2%.
In commodities, Brent crude, the international oil
benchmark, fell 2.6% to $41.72 a barrel.
The market for U.S. Treasurys is closed for Columbus Day.
—Joe Wallace contributed to this article.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com.
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