Stocks recovered earlier losses on Monday to narrowly eke out fresh record levels as investors looked past geopolitical and growth concerns.
The S&P 500 turned slightly positive in the final hours of trading, logging a record high. The Dow also reached a record close, while the Nasdaq held lower. The benchmark 10-year Treasury yield fell back below 1.3%. U.S. West Texas intermediate crude oil futures sank by more than 1% to trade around $67 per barrel.
The earlier moves lower – with the Dow down by as many as 284 points at session lows – came as jitters over the pace of global economic growth and risks to the outlook increased, with new economic data out of China disappointing on multiple fronts. Retail sales and industrial production each slowed more than expected in the world's second-largest economy in July, suggesting a more marked growth deceleration in the second half of the year as the country tries to contain fallout from the latest resurgence in coronavirus cases.
Elsewhere, disorder in Afghanistan weighed further on global markets, with chaos reported at the Kabul airport as civilians tried to flee from the country swiftly overtaken by the Taliban.
Lingering worries about the Delta variant have also been at play for investors, offset only partially by optimism over what has been to-date an exceptionally strong corporate earnings season. This week, a handful of additional S&P 500 index components will report quarterly results, with retail names like Walmart (WMT), Target (TGT) and Home Depot (HD) set to be among the most closely watched.
"I think it'll be very key to hear from U.S. retail companies to see not only if this Delta variant surge is having any impact to consumer behavior, but also to what their projections are for the rest of the year, given that we're in the back to school spending season," Margaret Reid, senior portfolio manager at Union Bank, told Yahoo Finance. "And we'll also get July retail sales ... so a lot of incremental data points in the coming week with ties to the Delta variant."
As of Friday afternoon, 91% of S&P 500 companies had reported second-quarter earnings results, and 87% of these had topped consensus estimates on earnings per share, according to FactSet. The expected overall growth rate for S&P 500 earnings stands at 89.3%, which would be the fastest increase since the fourth quarter of 2009.
According to many pundits, the robust rebound in corporate profits has been and will likely continue to be fuel for the market going forward, helping to counterbalance concerns over an inevitable deceleration in growth as the recovery matures.
"In an earnings season with many surprises – including the highest frequency of EPS [earnings per share] beats in our 22-year data history – one of the most notable was the surge in corporate buyback activity," David Kostin, chief U.S. equity strategist for Goldman Sachs, wrote in a note on Monday. "Strong corporate equity demand is one reason we forecast a 5% return to our S&P 500 year-end target of 4700."
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4:10 p.m. ET: S&P 500 and Dow gain to close at record highs; Nasdaq holds slightly lower
Here were the main moves in markets as of 4:10 p.m. ET:
Over the past month, the financials, materials and healthcare sectors have been the outperformers in the S&P 500, as cyclical stocks with earnings tied to the economic recovery caught another bid higher despite ongoing concerns over the Delta variant.
According to one strategist, three key factors have been behind the latest rotation.
"The U.S. data's been fairly strong despite some of the Delta risk," Stuart Kaiser, UBS head of equity derivatives, told Yahoo Finance. "We got through earnings. Typically during earnings, large-cap tech performs really well and that higher quality stock does a bit better because they're reporting really strong results. So I think getting through earnings helped people get the confidence to get into those lower quality cyclicals."
"And then the third part would be on the rates side, it looks like yields have bottomed a bit and started to rise a touch, and that tends to be generally positive for cyclicals," he added. "I think a combination of those three things as well as a lot of people have cited data out of the UK showing that the Delta variant hasn't completely disrupted their economy ... so maybe that trims the tail risk as well."
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10:12 a.m. ET: New York State manufacturing activity slid more than expected in August
The New York Federal Reserve's closely watched Empire State manufacturing activity index pulled back more than expected in August, signaling a sharp deceleration in the goods-producing sector after July's record surge.
The Empire State index dipped to 18.3 in August from 43.0 a month earlier, according to the new report Monday morning. Consensus economists were looking for a print of 28.5, according to Bloomberg data. Readings above 0 indicate expansion in a sector.
Supply chain issues continued to be a major source of pressure on the manufacturing sector, both in the state and nation-wide. However, indexes tracking future new orders and shipments each increased during the month, as did manufacturing firms' assessments of the six-month outlook.
The National Highway Traffic Safety Administration (NHTSA) said it had identified 11 crashes since January 2018 during which Tesla models struck vehicles involved in first responder scenes. As a result, the agency said it had opened a probe evaluating the Autopilot in Tesla vehicles made between 2014 and 2021.
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7:44 a.m. ET Monday: Stock futures point to a lower open
Here's where markets were trading Monday morning:
S&P 500 futures (ES=F): -13.00 points (-0.29%) at 4,449.50
Dow futures (YM=F):-103.00 points (-0.29%) to 35,317.00
Nasdaq futures (NQ=F): -44.00 points (-0.29%) to 15,081.75
People walk past the New York Stock Exchange (NYSE) at Wall Street on February 17, 2021 in New York City. (Photo by Angela Weiss / AFP) (Photo by ANGELA WEISS/AFP via Getty Images) ·ANGELA WEISS via Getty Images
