The Dow Edged Higher as Bulls Hoped to Build on Momentum After 2023's Best Week

On Monday, U.S. stocks made modest gains, with bullish investors aiming to continue the upward momentum following the best week of 2023 for major stock market indexes.

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Stock Performance:

• The Dow Jones Industrial Average (DJIA) increased by 88 points, or 0.3%, reaching 34,149.
• The S&P 500 (SPX) advanced by 10 points, or 0.2%, closing at 4,369.
• The Nasdaq Composite (COMP) gained 41 points, or 0.3%, closing at 13,519.

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Notably, last week saw substantial gains, with the Dow rising by 5.1%, marking its most significant weekly increase since the week ending October 28, 2022. The S&P 500 surged by 5.9%, and the Nasdaq Composite saw a 6.6% gain—these were their most substantial weekly gains since November 11, 2022.

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Market Drivers:Stocks enjoyed an upswing last week, driven by statements from Federal Reserve Chair Jerome Powell and indications of a cooling labor market, which led to a significant drop in bond yields. This fueled expectations that the U.S. central bank had completed its interest rate hikes for this cycle.

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Notably, the yield on the 10-year U.S. Treasury bond, which had recently hit a 16-year high above 5%, briefly dipped below 4.5% on Friday. However, in the new week, yields rebounded to 4.61%, somewhat tempering the optimism among equity investors.

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Stephen Innes, managing partner at SPI Asset Management, emphasized that Treasury bonds were the primary drivers of the market, with the S&P 500 following suit. The sustainability of the recent rebound in bond yields holds significant implications, with this week's bond auctions and the upcoming release of the consumer-price index being decisive factors that could impact the possibility of further rate hikes.

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Tom Essaye, founder of Sevens Report Research, noted that investors are uncertain about what the future holds and are considering two possibilities: a growth slowdown or a return to the soft landing and disinflation narrative that propelled stocks higher during the summer. The data in the coming weeks will shed light on this uncertainty.

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Economic data for the week is relatively slow, with the Federal Reserve's senior loan officer survey for October set to be released at 2 p.m. Eastern time on Monday. Additionally, Federal Reserve governor Lisa Cook is scheduled to speak at Duke University at 11 a.m.

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Meanwhile, the third-quarter earnings season is ongoing, though reports are coming in at a slower pace. Companies like NXP Semiconductors, Vertex Pharmaceuticals, and Tripadvisor are expected to release their results after Monday's closing bell. Key highlights for the week include Uber on Tuesday and Walt Disney on Wednesday.

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With 81% of S&P 500 companies having reported their results, 82% of them have surpassed earnings-per-share expectations, and 62% have exceeded revenue expectations, according to John Butters, senior earnings analyst at FactSet.

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