The S&P 500 climbed to a record high close on Tuesday as investors digested a mixed bag of early quarterly results and awaited a slew of additional reports from Tesla and other companies later this week. It was the third straight all-time high for the benchmark stock index.
Canada’s commodity-linked main stock index rose to a one-week high, as mining shares rallied on hopes that China would take measures to support its ailing economy.
Many investors view upcoming quarterly reports from the heavily weighted “Magnificent 7″ group of megacap companies as key to whether Wall Street’s recent rally continues or loses steam.
“It’s a crescendo of reports Wednesday and Thursday, and then next week will be even busier,” said Art Hogan, chief market strategist at B. Riley Wealth. “We’ve got a lot of things to contemplate over the course of this week and next that will likely will end up being a market positive.”
In extended trade, Netflix rallied 3.2% after the video streaming service blew past Wall Street subscriber estimates in the fourth quarter, driven by a strong slate of shows.
The S&P 500 climbed 0.29% to end the session at 4,864.59 points.
Analysts on average see S&P 500 fourth-quarter earnings up 4.6% year over year, compared to 7.5% growth in the third quarter, according to LSEG data.
Stock market valuations appear rich. The S&P 500 is trading at about 20 times forward 12-month earnings estimates, well above its long-term average of 16 times, according to LSEG.
“Earnings for all equity classes peaked and will move lower as the economy weakens and revenue growth stalls,” Wells Fargo senior global market strategist Sameer Samana said in a note.
Wall Street’s recent gains have been fueled by expectations of lower interest rates and optimism around artificial intelligence, which has helped lift the Philadelphia chip index over 5% so far in 2024, adding to a 65% surge last year.
The personal consumption expenditure (PCE) index - the Federal Reserve’s preferred inflation gauge - as well as the S&P Global PMI readings and an advance fourth-quarter GDP print this week will be key in assessing the central bank’s next interest rate decision when it meets on Jan. 31.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 110.29 points, or 0.5%, at 21,034.59, its fourth straight day of gains.
Chinese authorities are considering measures to stabilize a slumping stock market, according to various media reports, a day after China’s cabinet said it would step up mid- and long-term fund injections in the capital market.
“China is seeing very weak performance for a little while now,” said Diana Avigdor, portfolio manager and head of trading at Barometer Capital Management. “If you think that China is starting to see the other side ... I think that would be positive for the commodity complex.”
The materials sector, which includes precious and base metals miners and fertilizer companies, added 2.1% as copper and gold prices climbed.
Gold producer IAMGOLD Corp soared 15.1% after the company reported fourth-quarter production figures after the close on Monday.
Energy also rose but gains were held in check by weaker oil prices. The sector added 0.6% in Toronto, while oil settled 0.5% lower at US$74.37 a barrel.
Heavily weighed financials were up less than 0.1% but have rallied about 19% since October.
“We like the financials here. They are priced right,” Avigdor said. “The economy is holding its own and that’s why we think it’s priced right. ... It’s priced in all the negativity that it could.”
The Bank of Canada is due to update its economic forecasts on Wednesday when the central bank is expected to leave its benchmark interest rate unchanged at a 22-year high of 5%.
The Nasdaq gained 0.43% to 15,425.94 points, while Dow Jones Industrial Average declined 0.25% to 37,905.45 points.
Verizon Communications rallied 6.7% after forecasting a strong annual profit and posting its highest quarterly subscriber additions in nearly two years, while Procter & Gamble gained 4.2% after it topped second-quarter profit expectations.
3M tumbled 11% after forecasting dour annual earnings, while Johnson & Johnson dipped 1.6% after reporting quarterly results just above expectations.
D.R. Horton dropped over 9% after the homebuilder missed estimates for first-quarter profit.
Tesla climbed 0.2% ahead of its report late on Wednesday.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.2-to-one ratio. The S&P 500 posted 34 new highs and one new low; the Nasdaq recorded 102 new highs and 90 new lows. Volume on U.S. exchanges was relatively light, with 10.9 billion shares traded, compared to an average of 11.4 billion shares over the previous 20 sessions.
Reuters, Globe staff