US stocks traded near all-time highs on Monday, thanks to solid corporate earnings that overshadowed disappointing manufacturing data and declining US Treasury bonds. This boosted the S&P 500 and pushed Dow 36,000 points up for the first time. GameStop was one of the companies that posted massive gains.
More than 80% of S&P 500 companies reporting third-quarter results beat Wall Street estimates, setting the stage for stocks up by roughly 6% (since the start of the earnings season). Meanwhile, data showed that manufacturers faced persistent supply chain challenges in October. Fed officials are also meeting this week because investors are becoming increasingly concerned that the economy is facing the largest supply cuts since the 1973 oil crisis.
"There's no shortage of things to worry about," said Evan Brown of UBS Asset Management. "I would just say that stocks climb the wall of worry. We do anticipate more of a rotation as people gain more faith that the economy is on sounder footing. We should see rebalancing from growth stocks into value stocks."
Morgan Stanley strategist Michael Wilson noted that this bullish trend will most likely persist until later this month, but "not much longer" as the Fed is expected to start tapering, while profit growth will slow next year.
Other key events this week are:
- policy decision of the Reserve Bank of Australia (Tuesday);
- policy decision of the Federal Reserve, data on US orders and durable goods (Wednesday);
- OPEC meeting (Thursday);
- policy decision of the Bank of England (Thursday);
- data on US trade and jobless claims (Thursday);
- data on US employment (Friday).
