The S&P 500 closed Monday 0.4% lower after squandering opening gains and trading mostly in negative territory throughout the day. Another round of disappointing investor response to earnings, possibly rooted in the belief that corporations are at, or near, peak earnings growth, dampened any attempt for a rebound.
As for the other major averages, the blue-chip Dow Jones Industrial Average lost 0.5% and the small-cap Russell 2000 lost 0.2%, while the tech-heavy Nasdaq Composite added 0.3%.
Stocks opened slightly higher on Monday following a positive performance in China, where the Shanghai Composite rallied 4.1%. The jump, which extended Friday's notable gain, came on the back of verbal intervention from Chinese officials aimed at restoring investor confidence. President Xi, for instance, vowed to provide unwavering support for the private sector.
In Europe, Moody's dropped Italy's debt rating to Baa3 from Baa2, yet that is still an investment-grade rating. The fact that Italy's debt was able to avoid a "junk" status helped underpin markets within the region for awhile, but European stocks eventually settled Monday in the red. Italy's MIB lost 0.6%, while the Euro Stoxx 50 dropped 0.7%.
Back on Wall Street, relative strength in high-growth names within the information technology (+0.8%), consumer discretionary (+0.5%), and communication services (unch) sectors kept losses in check on Monday. The FANG bunch had an overall strong showing. Facebook (FB 154.78, +154.78), Apple (AAPL 220.65, +1.34), Amazon (AMZN 1789.30, +25.27), and Alphabet (GOOG 1101.16) all posted gains between 0.4% and 1.4%. Looking ahead, notable companies within these spaces that will report earnings later this week include Alphabet, Amazon, and Microsoft (MSFT 109.63, +0.97, +0.9%).
Nevertheless, the heavily-weighted financials sector (-2.1%) led the S&P 500 lower. Several small banks mirrored their bigger bank peers by beating earnings estimates on Monday, but the positive results were unable to foster much buying interest for the group, which is now down 5.4% in October. In total, nine of eleven sectors finished Monday in the red.
The energy sector (-1.1%) was another notable laggard, with oilfield services provider Halliburton (HAL 36.40, -1.14) losing 3.0% after the company issued below-consensus guidance, which overshadowed its better-than-expected earnings. In addition, the materials (-0.9%), real estate (-1.4%), health care (-0.8%), and consumer staples (-0.8%) sectors all underperformed.
Also of note, toy-maker Hasbro (HAS 95.01, -3.03) lost 3.1% after it missed top and bottom line estimates, blaming the bankruptcy of Toys "R" Us for its declining revenue.
Looking at other markets, U.S. Treasuries were dormant, as the yields on the 2-yr and 10-yr notes remained unchanged at 2.90% and 3.20%, respectively; the U.S. Dollar Index ended 0.3% higher at 96.00; and West Texas Intermediate crude settled 0.1% higher at $69.42/bbl.
In Washington, President Trump said that his administration is working on a major middle-class tax cut to be introduced at the beginning of November.
Investors did not receive any economic data on Monday and will not receive any data on Tuesday.
- Nasdaq Composite +8.2% YTD
- S&P 500 +3.1% YTD
- Dow Jones Industrial Average +2.4% YTD
- Russell 2000 +0.3% YTD