The Dow Jones industrial average and Nasdaq composite index were close behind, sending stocks upward in what is historically a bumpy month for markets. The Dow closed at 27,090, up about 0.6 percent on the day. The Dow is short about 1 percent from its record close of 27,359, set July 15. The tech-rich Nasdaq closed at 8,325, up 1 percent but short of its all-time high of 8,330 from July 26.
All three indexes are racing toward finishing October on the upside.
The tenor of the earnings season, so far, has bucked worries about corporations underperforming, with technology leading the way on upbeat reports from Microsoft, Intel and AT&T. The new economy fueled markets despite last week’s downbeat forecast from industrial bellwether Caterpillar, and big misses by Wells Fargo and Goldman Sachs.
“Despite some high-profile misses, earnings season has been generally positive,” said Kristina Hooper, global market strategist at Invesco. “It’s no surprise stocks have reached a new sugar high.”
The rest of the week is crowded with financial news, including a possible interest rate cut on Wednesday from the Federal Reserve and the highly anticipated jobs report from the U.S. Labor Department on Friday. Hiring, unemployment and wages are closely followed as ground-level indicators of the economy’s health.
The next several days are stacked with earnings results, too, any few of which could rain on the bullish parade.
Tuesday’s health-care trifecta of Amgen, Merck and Pfizer leads the way. Millennial favorites Apple, Starbucks, Lyft and Facebook all land on Wednesday. General Electric, Mastercard, Bristol-Myers Squibb, Altria Group, Mondelēz, Big Oil and others are sprinkled across the week.
The earnings surprises are feeding into a generally happy outlook on U.S.-China trade after months of pessimism. Stocks are also getting a positive bump from the belief that an accommodating Federal Reserve will keep the decade-long expansion in high gear with another interest rate cut.
“Optimism is hitting investors from all directions,” said Charlie Ripley, investment strategist at Allianz Investment Management. “On one side, there appears to be further progress on the first phase of a trade deal with China as both sides are on track to sign an agreement at an upcoming meeting in Chile next month. On another, we have a supportive Fed.”
Seven of 11 stock market sectors were in positive territory Monday. The down sectors included the “safe harbors” such as utilities and real estate, an indication that investors are willing make riskier bets that the economy remains on an upward trajectory with more good days ahead.
Microsoft, Goldman Sachs, 3M and Pfizer were the big Dow leaders. Microsoft — which has been trading places with Apple for the most valuable company in the United States — was up 2.5 percent after beating out rival Amazon on Friday for a $10 billion cloud computing contract from the federal government. (Amazon chief executive Jeff Bezos owns The Washington Post.)
Of the 202 S&P 500 companies that reported earnings through Monday morning, 156, or 77.2 percent, had beaten analyst estimates, according to Howard Silverblatt of S&P Dow Jones Indices.
“That’s a high beat rate,” Silverblatt said. “Historically, the beat rate is 67 percent.”
Silverblatt said companies are coming in above expectations because analysts had expected the economy to slow, resulting in lower profits. Specifically, third-quarter earnings estimates were reduced 9 percent, compared with where they stood at end of 2018, he said.
“Companies have beaten the lowered estimates three quarters in a row,” Silverblatt said. “Going into the quarter, there was expectations of a slower economy, more trade difficulties and a less cooperative Federal Reserve.”
Oil prices dipped on news that China’s economy continues to slow down. Futures prices for U.S. benchmark West Texas Intermediate crude fell more than 1 percent, to $55.71, Monday afternoon. Brent crude was down 1.4 percent, to $61.14.
Gasoline prices cooperated, with the national average price at the pump dropping by 4 cents to $2.60. That’s down 21 cents from a year ago, according to AAA. Lower gasoline prices are seen as an economic boon to average citizens, because that puts more money directly into their pockets. With the holiday season approaching, lower gas prices could have a ripple effect through many industries.