U.S. equities rose on Monday, building on gains from the previous week, as indications of economic slowdown suggested that the Fed’s aggressive approach of cooling the economy and so containing decades-high inflation is starting to have an impact.
The opening session of a week chock full of important economic data and high-profile company earnings saw gains for all three main U.S. stock indices.
A report from S&P Global revealed business activity decreased this month. This suggests that the Federal Reserve’s relentless campaign of steep interest rate increases is having the desired impact, which gives rise to hopes that the central bank will start reducing the rate at which it raises the Fed funds target rate.
Peter Tuz, head of Virginia-based Chase Investment Counsel said it’s a sign that the economy is slowing down and that the Fed’s policies are effective. To use a football analogy, they might be succeeding in their mission and the economy might be headed for the rate hikes’ fourth quarter.
The S&P 500 (.SPX) increased by 44.59 points, or 1.19%, to 3,797.34 while the Nasdaq Composite (.IXIC) increased by 92.90 points, or 0.86%, to 10,952.61. The Dow Jones Industrial Average (.DJI) increased by 417.06 points, or 1.34%, to 31,499.62.
Nine of the S&P 500’s 11 key industries closed in the green, with healthcare (.SPXHC) posting the highest percentage increase. Real estate (.SPLRCR) and materials (.SPLRCM) both finished the session in the red.
Shares of Tesla Inc. (TSLA.O) fell 1.5% after the electric car manufacturer slashed pricing for its Model 3 & Model Y vehicles by as much as 9% in China, indicating waning demand in the largest auto market in the world.
Pinduoduo (PDD.O), JD.com, and Baidu Inc.’s U.S.-listed shares all fell between 12% to 25% as President Xi Jinping unveiled the new Politburo Standing Committee, which is loaded with supporters.
Tuz said the news pouring out of China gives people the impression that China will become more assertive, if not hostile, in the future. However, it’s too early to predict how it will develop in terms of where individuals will make investments in the future.
This week, the third-quarter profits season kicks into high gear. About one-fifth of the S&P 500 businesses have reported thus far. Refinitiv data show that of those, 74.7% have produced results that have beyond expectations.
According to Refinitiv, analysts now anticipate an overall increase in S&P 500 earnings of 3.0%, lower from 4.5% at the start of the month.
This week’s earnings talk is likely to be dominated by the results from several powerful tech and tech-related firms.
On Tuesday, Microsoft Corp. (MSFT.O) and Alphabet Inc. (GOOGL.O) will follow. Apple Inc. (AAPL.O) and behemoth Meta Platforms Inc. (META.O) take the stage on Wednesday, and Amazon.com (AMZN.O) completes the FAANGs on Thursday.
High-rolling industries including Exxon Mobil (XOM.N), Ford Motor Co (F.N), Boeing Co (BA.N), 3M Co (MMM.N), Chevron (CVX.N), and General Motors Co (GM.N), are also anticipated to report profits this week (XOM.N).
On the NYSE, advancers exceeded decliners by a ratio of 1.36 to 1; on the Nasdaq, advancers were in the lead by a ratio of 1.03.
The Nasdaq Composite registered 73 new highs and 331 new lows, while the S&P 500 had 21 new 52-week peaks and 4 new slumps.
11.80 billion shares were traded on U.S. exchanges, exceeding the 11.56 billion averages for the entire session for the previous 20 trading days.
Meanwhile, here is a summary of recent activity. If we take a deeper look at Tesla’s standing from the latest sources, we see that in China, the world’s largest auto market, Tesla (TSLA.O) has reduced the starting prices for its Model 3 & Model Y automobiles by as much as 9%, bucking a trend of hikes in the sector.
The price reductions, which were announced in postings on the electric vehicle (EV) behemoth’s China homepage on Monday, are the company’s first in the country for 2022. Last month, Tesla started providing a small number of incentives to customers who choose to purchase its insurance.
