By Caitlin McCabe and Jem Bartholomew
U.S. stocks jumped sharply Monday, propelled higher by a surge in technology stocks that put major indexes on track for their highest close in nearly six weeks.
The S&P 500 and the Dow Jones Industrial Average climbed for the fourth consecutive session in midafternoon trading. The S&P 500, which rose 1.8% for the day, was on pace for its second-highest close in history. The Dow rallied 1%, or about 285 points.
Meanwhile, the Nasdaq Composite surged 2.8%, a move-up that is expected to be enough to push the tech-heavy index out of correction territory, which it entered in early September. The tech-heavy index is also on track for its third-highest close in history.
Megacap companies including Apple and Amazon.com were among the strongest performers, jumping 5.8% and 4.8%, respectively. Apple is set on Tuesday to unveil a 5G-enabled iPhone, which some investors hope could create growth similar to the kind seen in the iPhone’s earliest days. Amazon also is kicking off its Prime Day event of shopping deals Tuesday.
The robust gains build on last week’s advances, during which U.S. stocks rallied on signs that next month’s presidential election could have more of a decisive result than originally expected. National polls have showed a growing lead for former Vice President Joe Biden over President Trump.
This week, election expectations are likely to remain a focus among traders, though many will also be parsing the beginning of third-quarter earnings season. Investors are betting that the results will show corporate performance has turned a corner. With the economy continuing to slowly reopen, profits of large companies in the S&P 500 are now projected to record a drop of 20% from a year earlier, an improvement from the 25% decline anticipated at the end of June.
Other technology companies including Twitter and Facebook also jumped, with both growing more than 4%.
“The last two weeks were about improving market [participation] … but today it’s a day focused on technology,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory. “With so much uncertainty about fiscal stimulus out there, it’s natural to see rotation back into the secular growth stories.
“If you don’t get stimulus, those companies’ growth is likely to sustain, ” Mr. Lerner continued.
Still, Monday’s gains were broad. The materials sector was the only one of the S&P 500’s 11 industry groups to post a decline in midafternoon trading. JPMorgan Chase, Johnson & Johnson and Citigroup, all of which are expected to report earnings Tuesday, rose at least 1% or more.
This week, investors will be looking for signs from companies that cost cuts, including layoffs, are behind them, and that business leaders are confident about the quarters ahead, said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. He said that traders also will be looking for any signs that “precautionary cash hoards may turn into dividends next year.”
“It isn’t so much about the numbers and the degree to which companies beat estimates,” Mr. Kleintop said. “It’s those words that matter more and the tone and confidence from business leaders.”
In addition to earnings, traders also will be focused this week on any signs of progress on stimulus talks. The latest White House offer on a new coronavirus package hit resistance from both Democrats and Republicans over the weekend, deflating hopes that an agreement would be struck before Nov. 3.
Still, investors are weighing the possibility that a Democratic sweep of the presidency and Congress next month could lay the ground for a large stimulus package to be passed, offering additional relief to households and businesses, in the early months of next year.
“There is a good chance that we’ve overplayed the volatility due to the November election,” said Edmund Shing, global head of equity derivative strategy at BNP Paribas. The Federal Reserve is still “in ‘whatever it takes’ mode,” and both major parties are committed to more stimulus, though a bipartisan deal is very unlikely, he said.
Overseas, shares also climbed. The Stoxx Europe 600 gained 0.7%. China’s Shanghai Composite Index closed up 2.6% and Hong Kong’s Hang Seng Index advanced 2.2%.
In commodities, Brent crude, the international oil benchmark, fell 2.6% to $41.72 a barrel.
The market for U.S. Treasurys is closed for Columbus Day.
–Joe Wallace contributed to this article.
Write to Caitlin McCabe at [email protected]
(END) Dow Jones Newswires
October 12, 2020 15:47 ET (19:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.