Stocks moved higher on Monday as investors awaited a slew of earnings results from the Big Tech companies, as well as a myriad of other corporations across industries this week.
The Dow and S&P 500 set record intraday and closing highs. The Nasdaq gained, and shares of Tesla (TSLA) rallied to an all-time high with a market capitalization exceeding $1 trillion for the first time.
U.S. West Texas intermediate (CL=F) crude oil prices topped $85 per barrel, reaching the highest level since 2014. The move tracked gains in Brent crude (BZ=F), the international benchmark, which jumped above $86 per barrel for its highest level since 2018 after Saudi Arabia's energy minister suggested in a Bloomberg interview that oil producers exercise caution in boosting output despite fast-rising prices.
The benchmark 10-year Treasury yield hovered around 1.64%, or near its highest level since May, as inflation concerns remained front and center for investors amid rising energy and commodity prices and other price gains across the recovering economy. Last week, Federal Reserve Chair Jerome Powell said the elevated inflationary pressures spurred by supply chain constraints were "likely to last longer than previously expected, likely well into next year."
A number of individual companies have also flagged the impacts of rising costs in their earnings reports over the past couple weeks. Kevin Boone, executive vice president of sales and marketing for freight railroad company CSX Transportation (CSX), said during the company's earnings call last week that cost inflation has jumped over the last year, and "expectations have risen and are rising in the next year." And likewise, Whirlpool (WHRL) CEO Marc Bitzer said on the appliance company's earnings call he did not "expect that the inflation will quickly fall off" heading into next year.
This week's earnings results will center on those from the Big Tech companies including Facebook (FB), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL). These comprise some of the most heavily weighted components of the S&P 500. Most have underperformed the market this year after significant rallies in 2020 at the height of stay-in-place orders and demand for technology to stay connected.
Investors are hoping to see these companies echo the performance of some other earlier reporters and post estimates-topping results despite ongoing supply-side challenges. For the technology companies, these concerns will likely center on the impact of global chip shortages, as well as the impact of rising labor costs given their substantial workforces.
"We continue to strongly believe despite the lingering black cloud chip shortage that 3Q tech earnings will be standouts this week thus helping drive the sector higher into year-end as the Street continues to underestimate the fundamentals of this multi-trillion digital transformation playing out among consumer and enterprise tech names," Wedbush analyst Dan Ives wrote in a note on Sunday.
Still, this week overall will be a busy one for earnings season, with a total of about 165 companies in the S&P 500 posting results, according to data from Deutsche Bank.
As of Friday, about 23% of S&P 500 companies had reported actual results for the third quarter, and of these, 84% topped Wall Street's expectations for earnings per share (EPS), according to data from FactSet. The estimated earnings growth rate for the S&P 500 was 32.7%, based on actual results and expectations for companies still yet to report as of last week. If maintained through the end of third-quarter earnings season, that would mark the third-highest earnings growth rate posted for the index since 2010.
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4:07 p.m. ET: Stocks end at records: S&P 500 and Dow log all-time highs; Nasdaq gains 0.9% as investors eye Big Tech earnings
Here were the main moves in markets as of 4:07 p.m. ET:
10:31 a.m. ET: 'Consumers are out spending money': BofA's Moynihan
Bank of America CEO Brian Moynihan struck an upbeat tone on the state of the U.S. consumer, noting that spending has increased across a broad range of methods, and personal savings remain robust. This has in turn led to robust economic activity, he said.
“A lot of people focus on credit card and debit card payments, but that's only about 20 to 25% of all the ways consumers spend money,” Moynihan said during Yahoo Finance's All Markets Summit on Monday. “If you actually look across how consumers spend money – writing checks, taking money out of the ATM, Zelle payments, ACH payments, wires, everything – that's for us so far through October, year-to-date of 2021, is about $2.8 trillion of activity.”
He added that that sum was up about 20% over 2020, and by more than 20% compared to the same period in 2019.
“That's a very strong growth rate, the strongest we've seen in the last many, many years … So the consumers are out spending money," Moynihan added. "All in all, the simple fact is, the economy is as big as it was in 2019 nominally. It’s growing, predicted to grow at two to three times the rate it was predicted grow then. Consumers are spending at really twice the growth rate.
"The question is, is it all because of stimulus and the money? If you actually look at our consumer checking accounts, the last six months, people have average deposits of $10,000, even $15,000 or less. Their deposit balance has grown the last six months in each month," he said. "And then even in the last month of August and September, [it] grew by a couple percent, which means, even after stimulus largely stopped, you're still seeing their accounts grow, which means they're accumulating cash at excess of their spending.”
“It's a pretty strong backbone for the economy, which is driven by the consumer,” he added. “It's a fairly good picture, as long as, as long as the COVID virus stays in check.”
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9:41 a.m. ET: 'There's a lot of speculative activity': SEC Chair on cryptocurrency trading
Securities and Exchange Commission Chair Gary Gensler restated a cautious tone on cryptocurrencies, suggesting that trading activity in the space needs to come under tighter regulatory oversight.
“The concern for the investing public is the crypto asset space [is] $2.5 trillion. Most of it has not come within investor protection remit. And thus, investors aren’t protected the way they are whether they go into the stock or bond markets that we’ve overseen for so long,” Gensler said during Yahoo Finance’s All Markets Summit on Monday. “Without that I think it really is, as I’ve said to others, a bit of the Wild West. And these markets largely around the globe, 24 hours a day, seven days a week, don’t have the similar protections against fraud and manipulations front-running and other abuses.”
Gensler declined to comment on whether the SEC was becoming more amenable to the idea of a fund tracking spot prices of Bitcoin, following the launch of the first-ever U.S.-listed bitcoin futures ETF on the New York Stock Exchange last week, or the ProShares Bitcoin Strategy ETF (BITO). This fund — which allows investors to bet on futures contracts, or expected price changes in bitcoin — does not provide investments in bitcoin (BTC-USD) directly.
Gensler also suggested the SEC could tighten controls over cryptocurrency companies issuing stable coins. The Wall Street Journal reported earlier this month that the Biden administration was eyeing such a move, which could include a special-purpose charter for stable-coin issuers.
“There’s about $130 billion in stable coins today. That's up nearly 10-fold in the last year, and they are intertwined inside of crypto exchanges, crypto lending platforms, so-called DeFi,” Gensler said. “Those ‘poker chips,’ so to speak, are facilitating 80% of the volume. So they're only 5% of the crypto market but 80% of the volume in this token-to-token, crypto-to-crypto trading. So I think there's a lot of speculative activity. And again, it’s best to bring that inside regulatory investor protection remit.”
8:51 a.m. ET: Pinterest shares slide after PayPal says it is not considering acquisition of the social media company
Shares of Pinterest (PINS) slid in early trading after PayPal (PYPL) said in a brief statement that it was not considering an acquisition of the company. Shares of Pinterest dropped about 15% ahead of the opening bell.
"In response to market rumors regarding a potential acquisition of Pinterest by PayPal, PayPal stated that it is not pursuing an acquisition of Pinterest at this time," PayPal said on Sunday.
The announcement came following a report from Bloomberg last week that the financial technology company was contemplating a deal of Pinterest that could have valued it at $45 billion. The report had sent Pinterest's shares soaring and PayPal's sinking, with the former's stock gaining 12.8% on Oct. 20 the day of the report, while the latter's stock dropped 5%.
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8:38 a.m. ET: Tesla shares set to reach record high amid Hertz deal, Morgan Stanley price target increase
Tesla (TSLA) shares were on track to open at another all-time high, taking out its previous record level from Friday as investors cheered a new deal with car-rental company Hertz and a positive outlook from a major Wall Street firm. Shares were trading above $946 apiece during the pre-market session.
Hertz announced on Monday the company had ordered 100,000 Tesla vehicles, with these set to be delivered by the end of 2022. Hertz said it was setting out to "offer the largest EV rental fleet in North America and one of the largest in the world," and it also ordered new electric-vehicle charging infrastructure for use globally.
Separately, Morgan Stanley analyst Adam Jonas raised his price target on shares of Tesla to $1,200 from the $900 he saw previously, bringing his target to one of the highest on the Street. This came after Tesla posted third-quarter profits that topped Wall Street's estimates, on the heels of record quarterly deliveries for the company despite widespread chip shortages and port congestion.
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7:45 a.m. ET Monday: Stock futures tick up
Here's where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): +4.25 points (+0.09%), to 4,540.75
Dow futures (YM=F): +3 points (+0.01%), to 35,560.00
Nasdaq futures (NQ=F): +34.75 points (+0.23%) to 15,375.75
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 20, 2021. REUTERS/Brendan McDermid ·(Brendan McDermid / reuters)