Stocks Hover Near Record Levels Ahead of a Pivotal Earnings Week for Technology Companies

U.S. stocks cautiously kicked off the week as investors anticipated a wave of earnings releases and significant economic updates, all against the backdrop of major indexes either at or near their historical peaks.

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As the week commenced, the Dow Jones Industrial Average (DJIA) saw a modest increase of 15 points, or less than 0.1%, reaching 38,124. Simultaneously, the S&P 500 (SPX) inched up by 2 points to 4,893, while the Nasdaq Composite (COMP) experienced a gain of 24 points, equivalent to a 0.2% rise, settling at 15,480. The previous week concluded with a third consecutive weekly gain for stocks. The Dow achieved its fifth record close since the conclusion of 2023, and the S&P 500 finished merely a tenth of a percentage point below its all-time closing high. The Nasdaq Composite concluded the week less than 4% away from its record close recorded on November 19, 2021.

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Mark Arbeter, President of Arbeter Investments, remarked on the potential significance of the week, dubbing it as possibly the greatest week for "event risk" in many years, also humorously referring to it as "event reward."

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The week unfolds with a plethora of earnings reports from major companies such as Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META). Simultaneously, investors brace themselves for a Federal Reserve interest-rate decision, jobs market data, and the Treasury's quarterly refunding.

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Richard de Chazal, a macro analyst at William Blair, opined on the Federal Reserve's likely stance, suggesting that, being a data-dependent Fed, it would guide away from a rate cut in March while retaining the option to act if necessary. De Chazal also anticipated more clarity on the timing of the quantitative tightening tapering program.

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Concerns loom on the geopolitical front following an attack that resulted in the deaths of three U.S. soldiers and injuries to 34 others in Jordan. Oil futures were trading under $78 a barrel, gold prices rose, and the yield on the 10-year Treasury fell, with yields moving inversely to prices.

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Notably, with the S&P 500, S&P 100 (OEX), and Nasdaq-100 tracking QQQs at all-time highs, technical analyst Mark Arbeter emphasized the absence of "chart resistance or overhead supply above current prices." He highlighted that investors in these indices were sitting on profits, emphasizing that significant stock market gains often follow breakthroughs to all-time highs.

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However, Arbeter acknowledged potential concerns about overbought technical conditions, divergent momentum, overbought breadth, and stretched sentiment indicators. Despite the positive market dynamics, these factors warrant cautious consideration.

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