The S&P 500 and the Nasdaq closed at records on Monday as gains in energy and industrials helped the benchmarks finish in positive territory in the first five sessions of 2018 on optimism over a stronger economy and looming fiscal stimulus.
How did stock indexes fare?
The S&P 500 index SPX, +0.17% gained 4.56 points, or 0.2%, to 2,747.71 and the Nasdaq Composite Index COMP, +0.29% rose 20.83 points, or 0.3, to 7,157.39.
The Dow Jones Industrial Average DJIA, -0.05% bucked the trend to slip 12.87 points to 25,283.
Among the more active industries were utilities which rose 0.9% and technology, where a 0.4% rise supported the Nasdaq. Utilities are often viewed as defensive stocks which are more immune to economic cycles.
All three major U.S. equity benchmarks touched intraday records during the session after posting record gains on Friday, finishing the first week of the new year with solid gains. Both the S&P 500 and the Nasdaq have ended at records in the first four sessions of the year, the first time the S&P has since 1964, according to WSJ Market Data Group.
Read: Why Monday is a ‘big day for bulls’—and could suggest gains of nearly 20% in 2018
What drove the market?
A positive view for stocks that persisted in 2017 has continued in to early 2018, despite Monday’s muted action. The recently passed tax package is seen as a contributing factor, as are higher commodity prices and a run of solid economic data.
On Friday, Cleveland Fed President Loretta Mester told Reuters that she sees a strong U.S. economy as helping to make the case for four interest rate increases in 2018. In a separate interview with Reuters on Saturday, San Francisco Fed President John Williams said the central bank should lift interest rates three times this year, because of the lift tax cuts will provide.
“We’re in a pretty good situation: the economy is doing great, everyone expects us to raise rates gradually…and if the data change we can respond to that,” said Williams, who added that he wasn’t concerned about a sudden jump in inflation.
Going forward, investors will watch for fourth-quarter earnings from big banks, which will kick off fourth-quarter earnings season this week. J.P. Morgan Chase & Co. JPM, +0.15% BlackRock Inc BLK, +0.75% and Wells Fargo & Co. WFC, -1.13% are all scheduled to release reports on Friday. The results will provide insight into the state of American corporations in the current economic environment, as well as possibly giving some clarity into what impact the recently pass tax reform legislation could have on profits.
What were strategists saying?
J.J. Kinahan, chief market strategist at TD Ameritrade, suggested that many investors were waiting for the start of the earnings season before making big bets. “The multinational financial companies reporting on Friday really do set the trend. What they say about growth in the U.S. and world wide can give you a handle on what to expect from other companies,” he said.
For 2018, Kinahan said he saw inflation and the reduction of the Federal Reserve’s balance sheets as risks, although he remained fundamentally optimistic about stocks. “There’s a reason we’ve had this incredible run,” he said.
David Madden, market analyst at CMC Markets, said despite the emergence of short-term profit-taking on recent gains, the outlook for the market remains positive.
Fed speakers
Atlanta Fed President Raphael Bostic said Monday that the Fed should keep raising interest rates but at a slower pace than last year. He also indicated that he is comfortable with a slow removal of policy accommodation if the economy continues to grow and inflation picks up.
San Francisco Fed President John Williams suggested on Monday that the central bank could better head off recession by sticking to lower interest rates for longer to bolster inflation over the next few years. Over the weekend, he said he would like to see three interest rate hikes this year given the accommodative support from tax cuts, according to CNBC.
Which stocks were in focus?
GoPro Inc. GPRO, -12.77% plunged more than 30% after it gave a fourth-quarter revenue forecast that was sharply below analyst expectations. But the stock pared losses to shed 13% after the camera company said it is exploring a sale.
Nvidia Inc. NVDA, +3.06% shares rose 3.1%. At a pre-CES news conference in Las Vegas on Sunday, the chip maker announced a partnership with Uber Inc. to provide the ride-hailing company with self-driving hardware. The stock was one of the biggest contributors to a 0.7% gain in the PHLX Semiconductor index SOX, +0.74% which in turn supported the tech sector.
Shares of Celgene Corp. CELG, -0.77% fell 0.8% after the biotech group announced a deal to buy blood-disease biotechnology company Impact Biomedicines for as much as $7 billion.
Read: Why 2018 is a make-or-break year for pharma
Both FedEx Corp. FDX, +1.03% and United Parcel Service Inc. UPS, +1.21% were upgraded at UBS, which could provide further upside for the transportation sector. Shares of FedEx rose 1% while UPS was up 1.2%.
Dave & Buster’s Entertainment Inc. PLAY, -22.32% tumbled 22% after the company cut its 2017 profit and sales outlook.
What were other markets doing?
Asian markets continued to rally, with Taiwanese stocks soaring to a 28-year high. In Europe, the Stoxx Europe 600 index SXXP, +0.30% posted modest gains.
The ICE dollar index DXY, +0.22% added 0.5% to hit a 2018 high.
Oil prices CLG8, +0.23% strengthened, ending higher on Monday, while gold GCG8, -0.38% snapped a record winning streak to slip 0.1%.
In cryptocurrencies, bitcoin futures BTCF8, +1.51% on the CME Group Inc. fell 7.8% to $14,924.44 from Friday’s settlement of $16,590. Ether coins on the Ethereum blockchain tapped a new all-time high atop $1,200 on Monday, but are now lower, according to CoinDesk.
—Barbara Kollmeyer contributed to this article.