Dow edges higher as stock-market bulls look to build on momentum after best week of 2023

What’s driving markets

Stocks rose last week after comments from Federal Reserve Chair Jerome Powell and signs of a cooling labor market forced bond yields sharply lower as expectations grew that the U.S. central bank was finished raising interest rates in this cycle.

Yields on the benchmark 10-year U.S. Treasury bond
BX:TMUBMUSD10Y,
which just a few weeks ago had traded at a fresh 16-year high above 5%, at one point on Friday dipped below 4.5%.

However, the new week sees yields picking back up to 4.61%, which was somewhat constraining equity bulls’ newfound optimism early Monday as investors awaited a series of bond auctions later in the week.

“Equities are playing second fiddle as Treasury bonds are unquestionably the primary drivers, with the S&P 500 merely tagging along for the ride,” said Stephen Innes, managing partner at SPI Asset Management.

“Whether the recent rebound in bonds can be sustained holds significant implications. This week’s bond auctions will play a crucial role, and the upcoming [consumer-price index] release later this month will be decisive significantly, as it might eliminate the possibility of another rate hike entirely,” Innes added.

Meanwhile, the near-term outlook for the U.S. economy remained at the front of investors’ minds as signs of a cooldown continued to mount. Investors are “searching for ‘what’s next’ and that could be either 1) A growth scare or 2) A resumption of the soft landing and disinflation narrative that push stocks higher this summer,” said Tom Essaye, founder of Sevens Report Research, in a note.

“We will all find out together via the data,” he wrote.

Need to Know: Rally will fizzle out in a week or two, Morgan Stanley strategist Wilson says

It’s a slow start to the week in terms of economic data, with just the Federal Reserve’s senior loan officer survey for October due for release at 2 p.m. Eastern Time Monday. Federal Reserve governor Lisa Cook is expected to speak at Duke University at 11 a.m. She’s the only Fed policymaker set to speak Monday, according to the central bank’s calendar.

Meanwhile, the third-quarter earnings season continues, but reports are coming in at a slower pace. NXP Semiconductors
NXPI,
+0.14%,
Vertex Pharmaceuticals
VRTX,
+2.47%
and Tripadvisor
TRIP,
+1.46%
will release their results after Monday’s closing bell. Highlights for the week may be Uber
UBER,
+0.36%
on Tuesday and Walt Disney
DIS,
+0.23%
on Wednesday.

See: Disney and other entertainment giants report after upbeat results from peers, but investors are getting harsher on companies that don’t deliver

With 81% of S&P 500 companies having reported results, 82% of those have delivered a positive earnings-per-share surprise and 62% have posted a positive revenue surprise, according to John Butters, senior earnings analyst at FactSet. However, stocks’ reaction has been mixed, likely due to a high bar for forward guidance, as Barron’s reported.

Companies in focus