Wall Street Pulls Back From Its Records Ahead of a Big Week
Oct 23, 2024
After a long stretch of breaking records, U.S. stocks pulled back slightly on Monday. The S&P 500 slipped by 0.2%, coming off a six-week winning streak—its longest of the year. Meanwhile, the Dow Jones Industrial Average dropped 344 points, or 0.8%, from its record high set on Friday, while the Nasdaq composite edged up by 0.3%.
The mixed results reflect a broader trend across global markets. While U.S. stocks dipped, crude oil prices regained some of last week’s losses, and U.S. Treasury yields climbed. European markets mostly fell, while Asian markets ended mixed.
Interest Rates Weigh on Stocks
Rising U.S. Treasury yields put pressure on certain sectors, including real estate and housing, which tend to struggle when interest rates go up. Real estate stocks took the sharpest hit among the S&P 500 sectors, with homebuilders Lennar and D.R. Horton dropping more than 4%. Home Depot also felt the impact, with a 2.1% drop.
This slight pullback comes after a record-breaking rally driven by optimism that the U.S. economy could avoid a painful recession despite battling high inflation. With the Federal Reserve cutting interest rates to keep the economy moving, some investors are still betting that stocks could rise even further. However, critics are warning that stock prices may be outpacing actual corporate profits, which raises concerns about the sustainability of the rally.
Big Earnings Week Ahead
This week, more than 100 companies in the S&P 500 are set to report their quarterly earnings, including major players like AT&T, Coca-Cola, IBM, General Motors, and Tesla. Tesla’s stock dropped by 0.8% on Monday ahead of its report, especially after disappointing investors with fewer details than expected about its robotaxi plans.
Meanwhile, Boeing gained 3.1% after reaching a tentative contract deal with striking machinists, potentially ending a walkout that has disrupted airplane production for over a month. Union members are scheduled to vote on the contract Wednesday.
Other Notable Stock Movements
Spirit Airlines had an impressive 53.1% surge after securing a credit-card processing agreement. This year, the airline’s stock has taken a beating, down 91% following the cancellation of its merger with JetBlue.
Trump Media & Technology Group also rose 5.8%, continuing a strong run as the company behind the Truth Social platform remains closely tied to former President Donald Trump’s political prospects.
Market Trends Point to Political Shifts
According to Morgan Stanley strategists, recent market activity may indicate a shift in investor sentiment toward a possible Trump victory in the upcoming election. Stocks in financial companies are leading the market, while consumer companies, which could be hurt by tariffs, are lagging.
What’s Next for the Market?
The bond market saw the 10-year Treasury yield rise to 4.19% from 4.08% last Friday. This week, there aren’t many top-tier economic reports expected, though a preliminary update on U.S. business activity is due Thursday. The Bank of Canada will also announce its interest rate decision on Wednesday, where a half-point rate cut is possible.
Global Stock Markets Mixed
In China, stock markets ended mixed after the central bank cut key lending rates to help property developers struggling with debt. The Shanghai index rose 0.2%, while Hong Kong’s index fell 1.6%.
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