The S&P 500 ticked higher Monday as Wall Street geared up for a busy week of corporate earnings and looked ahead to a key policy announcement from the U.S. central bank.
The broad market index gained 0.08%, closing at 5,463.54, and the Nasdaq Composite advanced 0.07% to end at 17,370.20. The Dow Jones Industrial Average lost 49.41 points, or 0.12%, and closed at 40,539.93.
On Semiconductor advanced 11.5% after reporting better-than-expected earnings and revenue, making the stock Monday's best performer in the broad market index. Tesla rose 5.6% after Morgan Stanley named the electric vehicle stock a top pick.
This week's earnings slate will help determine whether tech stocks can bounce back from last week's declines. Microsoft, Meta Platforms, Apple and Amazon are all set to report their quarterly results in the coming days.
Another key event this week will be the Federal Reserve meeting, with the central bank set to release a new policy statement on Wednesday. The Fed is not expected to cut its benchmark interest rate from the current range of 5.25% to 5.50% this week, but traders will be looking for clues as to how likely the central bank is to make a move at its September meeting.
"A market in motion tends to stay in motion — and that is what is encouraging investors at this point," CFRA Research chief investment strategist Sam Stovall said.
Money Report
Monday's tepid moves are driven in part by optimism toward the remainder of second-quarter earnings, Stovall said. He expects a near-term digestion of gains in the broader market, however, citing its "very rich valuations."
Monday's moves come after a volatile week in the stock market. The S&P 500 dipped 0.8% to end last week, while the tech-heavy Nasdaq Composite fell 2.1%. However, the Dow rose 0.8% and the small-cap Russell 2000 rose 3.5%.
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S&P 500 and Nasdaq end Monday slightly higher
The S&P 500 and the Nasdaq Composite inched higher on Monday as investors looked to a slate of big tech earnings out in the coming days.
The S&P 500 climbed 0.08% to end at 5,463.54, while the Nasdaq Composite gained 0.07% to close at 17,370.20. The Dow Jones Industrial Average lost 49.41 points, or 0.12%, to finish at 40,539.93.
— Pia Singh
Arm Holdings slips on HSBC downgrade as firm expects shares to fall nearly 30%
HSBC anticipates some significant downside ahead for shares of Arm Holdings.
"AI PC narrative not as bullish as previously expected despite higher royalties," wrote analyst Frank Lee as he downgraded shares to a reduce rating.
"Despite our bullish view on royalty payments per chip for AI PC [central processing units] rising from 5% to 10% of [average selling price] and higher per core ASP … there is a lack of visibility on the overall unit [total addressable market," he added.
Lee upped the firm's price target to $105 from $100 a share, reflecting nearly 30% downside from Friday's close. He also views weakness in the smartphone market as a potential uncertainty for earnings.
Shares have nearly doubled since the start of 2024. The stock slipped about 5.2% on Monday.
— Samantha Subin
Tesla rises after Morgan Stanley names EV maker top auto pick
Tesla shares jumped more than 5% on Monday after Morgan Stanley crowned the electric vehicle maker as its top pick among auto stocks.
Analyst Adam Jonas replaced Ford with Tesla, citing the latter's efforts to cut costs and manage risk. Ford shares slid more than 1% in midday trading.
Jonas' call comes as automakers have grappled with the end of EV euphoria. Many of the companies in this sector have either walked back or delayed plans for this car type.
"While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house," Jonas wrote to clients. "We found it notable that Ford management spent far more time on its 2Q conference call discussing EVs than Tesla did."
Even with Monday's move, Tesla shares have still dropped more than 5% this year. Ford shares have slid nearly 10%.
— Alex Harring
Magnificent Seven ETF rises for second straight day
The sell-off in Big Tech appears to have found some stability, at least for the short term.
The Roundhill Magnificent Seven ETF (MAGS) rose nearly 1.2% on Monday, following a 1% gain on Friday.
Prior to this bounce, the exchange-traded fund had fallen in seven of eight trading sessions, with a cumulative loss of almost 10%.
— Jesse Pound
Investors may be seeing McDonald's as a great value, as stock jumps more than 4% on plans to focus on affordability
McDonald's is hearing the message consumers are sending loud and clear: They want more value.
While the fast-food giant missed Wall Street's quarterly targets, investors appear more focused on what is to come, and they seem to suspect that management is on the right track with its approach to pricing.
McDonald's shares were recently trading up 4.5% as management said it was working to make sure its menu is priced right. It also will continue its popular $5 meal deal.
"We've seen a lot of enthusiasm and the number of $5 meal deals sold are above expectations," said Joe Erlinger, McDonald's U.S. president, on its earnings conference call. "Trial rates of the deal are highest amongst lower income consumers and sentiment towards the brand around value and affordability has begun to shift positively."
— Christina Cheddar Berk
Russell 2000 small caps pacing for bearish 'outside day'
Small-cap stocks are heading for a potential bearish signal known as an "outside day" on Monday if the Russell 2000 closes below 2,238.67, which was Friday's lowest price.
The small-cap index has been outperforming large-cap indexes this month amid a sector-fueled rotation in the equity market. The Russell 2000 is up more than 9% in July, compared to a 0.3% gain for the S&P 500. The Russell has outperformed the S&P by more than three standard deviations above the historical average over the past 20 trading days. Market watchers have called for a near-term pause in the rally.
Crypto-connected stocks are among those furthest off their intraday highs, including Riot Platforms (RIOT), Cipher Mining (CIFR) and Marathon Digital (MARA). Other notable names trading significantly off their highs include Archer Aviation (ACHR), Carvana (CVNA) and SoundHound AI (SOUN).
An "outside day" is a two-day technical pattern where the second day's trading range fully engulfs the prior day's range and changes the direction of recent momentum. Traders often use this pattern to predict potential reversals in an asset's direction.
— Nick Wells
On Semiconductor jumps on earnings beat
On Semiconductor popped nearly 13% on Monday after reporting an earnings and revenue beat before the bell.
The chip company's second-quarter adjusted earnings per share came in at 96 cents, topping the 92 cents expected from analysts polled by FactSet. Revenue was $1.74 billion, versus the $1.73 billion consensus estimate. However, both adjusted earnings per share and revenue were down from the second quarter of 2023.
The company guided for third-quarter earnings per share to come in between 91 cents and $1.03, while it anticipates third-quarter revenue will be between $1.70 billion and $1.80 billion.
"We remain dedicated to driving growth through market share gains, doubling down on investments in strategic markets, and expanding the breadth of our portfolio of industry-leading products with analog and mixed-signal solutions," CEO Hassane El-Khoury said in the earnings press release.
"As reflected by our recent supply agreement with Volkswagen Group, we also continue to strengthen our silicon carbide leadership position in automotive as we ramp production with leading global OEMs in Europe, North America and China," he added.
— Michelle Fox
Stocks making the biggest moves midday: Walt Disney, Dexcom and more
These are the stocks making the biggest moves in midday trading:
- Walt Disney — Shares of the entertainment giant gained 2% after a big box office debut for "Deadpool & Wolverine."
- Dexcom — Shares of the diabetes company were trading 5% higher, recouping some of their losses from Friday.
- On Semiconductor — Shares jumped nearly 13% after the chip company reported financial results that topped expectations.
Read the full list of stocks moving here.
— Lisa Kailai Han
Higher menu prices keep McDonald's customers away
Customers resisted higher menu prices as McDonald's results missed across the board in the latest quarter. Same-store sales declined in all regions, leading to a 1% decline companywide, versus Wall Street expectations for a 0.4% rise. It was the first same-store sales contraction since Q4 of 2020.
Revenues were flat in the latest quarter, but missed Wall Street expectations by the largest amount since October 2014 ($6.49 billion vs. $6.61 billion estimate).
That led to the fast-food giant's second consecutive earnings miss, with adjusted earnings per share of $2.97 versus a $3.07 estimate, its biggest earnings miss since January 2022 . Earnings contracted 6% in the latest quarter, the biggest year-over-year decline since Q4 of 2020.
Despite all the bad news, shares of McDonald's are up — likely because the poor performance happened before the company began offering its new $5 value menu. That initiative began toward the end of June, just days before the latest quarter ended. McDonald's has been counting on that value proposition to attract guests back to its restaurants amid what is currently a very competitive fast-food sales environment.
— Robert Hum
S&P 500 opens higher on Monday
The Dow Jones Industrial Average opened roughly 76 points lower, or 0.2%. The S&P 500 climbed 0.2%, and the Nasdaq Composite gained 0.5% to start the week.
— Pia Singh
iShares Russell 2000 ETF rises in premarket trading, signaling ongoing rally in small caps
The recent trade into small-cap stocks may not be losing steam just yet.
The iShares Russell 2000 ETF (IWM) gained nearly 0.9% in premarket trading, signaling the market's broader rotation into small-cap stocks could continue this week. The Russell 2000 index of small caps ended last week 3.5% higher, and is up 12% over the past month.
Boosting this rotation is the expectation that central bankers will soon cut interest rates and that the improved rate outlook and inflationary environment should then boost small caps and other cyclical areas of the market, which tend to have higher financing costs.
— Pia Singh
See the stocks moving before the bell
These are some of the stocks making notable moves before the bell on Monday:
- McDonald's — Shares ticked down slightly after the fast-food giant posted second-quarter results that missed analysts' expectations. McDonald's also said same-store sales declined broadly.
- Akamai Technologies — The cloud security stock added 2% after Guggenheim upgraded shares to a buy rating.
- Tesla — The electric vehicle titan advanced 1.5% after being crowned the top U.S. auto stock pick by Morgan Stanley analyst Adam Jonas.
— Alex Harring
Is the sell-off already over? History says no
The S&P 500's decline from its July 16 all-time high may not be over, according to market history collected by Sam Stovall.
From its high to the low last week, the drop in the S&P 500 totaled 4.7%, according to the chief investment strategist at CFRA. Since 1990, 68% of all declines of 4.5% or more became pullbacks within a "matter of weeks," wrote Stovall in a Monday note. The strategist defines a pullback as a decline of 5% to 9.9%.
The S&P 500 currently sits 3.7% from its high after a recovery Friday on encouraging inflation data.
— John Melloy
Market broadening looks 'realistic,' says Oppenheimer
Oppenheimer strategist John Stoltzfus noted that after last week's volatile market action, the prospects of a broadening rally out of megacap tech is becoming more plausible.
The S&P 500 and Nasdaq Composite fell last week, while the small-cap Russell 2000 and Dow Jones Industrial Average posted gains.
"It's not so much that investors are abandoning the 'Magnificent Seven' stocks and the domination of market performance by the largest tech names but rather the broadening to us looks like a realistic perception by market participants that the next leg up requires a wider and less concentrated approach for stocks to move higher as the Fed gets nearer to cutting its benchmark rate," Stoltzfus said in a note.
— Fred Imbert
Fed likely to hold rates steady this week
The Federal Reserve's Federal Open Markets Committee meets on Tuesday and Wednesday, but the market is not expecting a rate cut this week.
Traders in the fed fund futures market put the probability of the central bank holding rates steady for this meeting at roughly 96%, according to the CME Fed Watch Tool.
However, traders do overwhelmingly expect one cut at the September meeting.
— Jesse Pound
Futures open little changed
Equity futures were calm at 6 p.m. in New York, with Dow futures adding about 50 points.
— Jesse Pound
Busy week of earnings ahead
Here are some of the biggest earnings reports on deck this week:
Monday: On Semiconductor, McDonald's
Tuesday: Microsoft, Starbucks, Advanced Micro Devices
Wednesday: Meta Platforms, Qualcomm, Boeing
Thursday: Apple, Amazon.com, Hershey
Friday: Exxon Mobile, Chevron
— Jesse Pound
