S&P 500, Dow close at fresh record peaks on tech buying

Wall Street has closed up, with both the S&P 500 and the Dow posting fresh record highs, as investors bought into technology stocks ahead of a busy week packed with corporate earnings and crucial economic data.

On a somewhat subdued day for trading, given bond markets were shut due to the federal holiday, US equities maintained the upward momentum from Friday, when major banks kicked off the third-quarter corporate earnings season on a positive note.

With 41 S&P 500 companies expected to report results this week, this flood of new data points from corporate America will help investors assess the health of the US economy, and whether companies can continue to justify stretched stock market valuations.

Before then though, it was technology stocks that helped drive markets higher on Monday with semiconductors particularly in vogue.

An index of semiconductor companies jumped to a more than two-month high, aided by advances by market heavyweight Nvidia, as well as gains by Arm Holdings and Qualcomm.

The information technology index was a leading gainer among the S&P 500 sectors. Among other growth stocks, Apple and Microsoft advanced, as did Alphabet and Tesla.

According to preliminary data, the S&P 500 gained 46.47 points, or 0.80 per cent, to end at 5,861.50 points, while the Nasdaq Composite gained 159.70 points, or 0.87 per cent, to 18,502.64. The Dow Jones Industrial Average rose 217.81 points, or 0.51 per cent, to 43,081.67.

For the Dow, it was the first time it had ended above 43,000 points. Gains on the benchmark, however, were kept in check by a drop in Caterpillar, following a brokerage downgrade, and a fall in Boeing after the planemaker flagged a larger-than-expected Q3 loss on Friday.

Bank earnings may have boosted hopes that solid results could help stocks continue their strong 2024 run. However, with stock valuations stretched - the S&P 500 is trading at 21.8 times forward earnings, versus a long-term average of 15.7 - companies might struggle to satisfy investors.

Year-over-year third-quarter earnings growth for the S&P 500 is estimated at 4.9 per cent, according to data compiled by LSEG on Friday.

"If you think about the earnings backdrop going into it, I would expect the bias to probably lead to the upside in this earnings cycle," said Kevin McCullough, portfolio consultant at Natixis Investment Managers Solutions.

"It's not like the prior earnings cycles where you went in with a really lofty set of expectations and it was really hard for companies to deliver on that," he said, adding because the bar was now a little bit lower, it was easier for investors to see company reports in a positive light.

Among those reporting numbers on Tuesday are a slew of big-name financials, including Bank of America and Citigroup, as well as healthcare giants Johnson & Johnson and UnitedHealth Group.

Investors will also watch for crucial economic data this week, notably the September retail sales figures, for clues on the financial health of US consumers.

Natixis' McCullough said consumer-related data is becoming more important for clues on Fed thinking, as the central bank switches more towards fulfilling the growth side of its mandate.

The two Fed speakers on Monday both adopted cautious tones on future rate policy.

Minneapolis Fed president Neel Kashkari said he sees modest interest-rate cuts ahead as inflation hovers near the central bank's 2.0 per cent target. Speaking this afternoon, Fed governor Christopher Waller called for "more caution" on interest-rate cuts ahead.

Bets on a 25-basis-point reduction at the Fed's November meeting stood at 86.1 per cent, according to the CME Group's FedWatch tool, as traders dialled back expectations of an outsized cut.

US-listed shares of Chinese firms dropped, including Alibaba and PDD Holdings, as investors were left guessing at the size of the overall fiscal stimulus China announced on Saturday.