Dow Closes at Highest Level in Six Weeks – with insight from the Wall Street Journal
Investors to parse earnings from major companies including Apple, Amazon.com and Boeing
___STEADY_PAYWALL___By Caitlin McCabe and Alexander Osipovich
U.S. stocks gained on Monday as investors focused on encouraging signs from corporate earnings and hopes that the Federal Reserve would slow the pace of interest-rate increases.
The Dow Jones Industrial Average climbed 417.06 points, or 1.3%, to 31499.62, its highest closing level in six weeks.
The S&P 500 advanced 44.59, or 1.2%, to 3797.34. The technology-heavy Nasdaq Composite rose 92.90, or 0.9%, to 10952.61, bouncing back after it started the day in the red.
Last week, the Dow notched its best three-week stretch since November 2020, offering investors a reprieve from the selling pressure that has whipsawed portfolios this year. The rally was kicked off, in part, by a batch of corporate earnings—particularly from banks and airlines—that offered an encouraging outlook on the U.S. economy. Stocks then raced higher on Friday after The Wall Street Journal reported that Fed officials are likely to consider the possibility of shifting to smaller interest-rate increases in December.
“Market participants are desperately looking for a Fed pause or pivot,” said Chris Senyek, chief investment strategist at Wolfe Research.
Still, he cautioned that such hopes would likely be dashed by continuing high inflation and low unemployment, which would pressure the central bank to maintain its hawkish stance. “We think a Fed pause is a long ways off,” Mr. Senyek said.
Investors are looking ahead to a busy week of earnings results. Quarterly reports are due this week from tech giants Apple, Amazon.com and Google parent Alphabet as well as blue-chip companies such as Coca-Cola and Boeing. Despite some early reports that have shown signs of optimism, fewer companies than usual are beating Wall Street’s earnings expectations.
U.S. investors largely shrugged off geopolitical jitters from China, where Xi Jinping cemented his control over the ruling Communist Party by securing a third term and appointing a number of loyalists to the party’s most powerful decision-making body.
The news sent Hong Kong’s benchmark Hang Seng Index tumbling 6.4%, its biggest one-day decline since the global financial crisis, amid fears that Mr. Xi would continue to pursue zero-Covid policies and a hard line in foreign policy.
U.S.-listed shares of Chinese tech giants Alibaba and Baidu both dropped 13%. The selloff wiped out around $52 billion of market capitalization from the five largest U.S.-listed Chinese companies.
Casino operator Las Vegas Sands, which owns properties in Macau, slid $4.02 a share, or 10%, to close at $35.05, making it the worst performer in the S&P 500. Tesla shares fell $3.19, or 1.5%, to $211.25 after the company lowered prices for vehicles sold in China, the world’s biggest electric-vehicle market.
“There is concern about the direction of U.S.-Chinese relations, and I think that will continue to ripple through the market,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. But, she added, “As far as Wall Street is concerned, it’s still fixated on what the Fed is doing.”
Yields on U.S. government bonds continued to march higher on Monday. The yield on the 10-year U.S. Treasury note rose to 4.231%—its highest closing level since June 2008—from 4.212% Friday.
Many investors expect the Fed to raise interest rates by 0.75 percentage point for a fourth consecutive time at its meeting next month. Most are now focused on what will happen in December. Federal-funds futures, used by traders to wager on the course of interest rates, on Monday afternoon showed a 43% chance that the central bank raises interest rates by a smaller 0.5 percentage point in December, up from 34% last week, CME Group data show.
Overseas, the FTSE 100 gained 0.6% after Rishi Sunak, the U.K.’s former Treasury chief, won the contest to succeed Liz Truss as prime minister, reassuring investors after a volatile period for British markets. U.K. government bond prices rallied, sending yields sharply lower. The yield on the U.K.’s 10-year gilt fell to 3.74% from 4.05% Friday, according to Tullett Prebon.
The pan-continental Stoxx Europe 600 gained 1.4%.
In Asia, China’s CSI 300 dropped 2.9% and the Shanghai Composite fell 2%. Japan’s Nikkei 225 rose 0.3% amid a possible yen-buying intervention by the Japanese government.
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