Dow, S&P 500 close at record highs ahead of major retail earnings reports

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Market fundamentals still support taking risk, says JPMorgan's David Lebovitz
Market fundamentals still support taking risk, says JPMorgan's David Lebovitz

The Dow Jones Industrial Average and the S&P 500 notched fresh record closes on Monday ahead of major retail earnings reports this week.

The S&P 500 has now doubled its level from its pandemic-low close on March 23, 2020. The 100% rally is the fastest bull-market doubling off a bottom since World War II, according to CNBC's analysis of S&P 500 Global data.

After paring losses earlier in the session, the S&P 500 gained over 0.2% to 4,479.71. The Dow jumped 110.02 points, or 0.3%, to 35,625.40. The Nasdaq Composite dipped roughly 0.2% to 14,793.76.

Source: CNBC

Retail stocks inched higher ahead of quarterly earnings reports from major companies. Home Depot and Walmart rose 1.1% and 0.8%, respectively, ahead of Tuesday reports. Target and Lowe's both edged higher ahead of reports slated Wednesday.

The major U.S. stock indexes saw losses earlier Monday amid fears of slowing global growth, with China's economic recovery lagging and oil prices falling.

Data showed Chinese economic growth slowing more than expected. China's retail sales increased by 8.5% in July year-over-year, below the 11.5% forecast from economists polled by Reuters. Online sales gained just 4.4% for the month. On the manufacturing sector in the country, industrial production increased by 6.4%, below the 7.8% consensus estimate.

China's National Bureau of Statistics noted an impact from Covid and domestic flooding, saying the country's "economic recovery is still unstable and uneven."

"Delta driven slowdown grips China," CNBC's Jim Cramer said in a tweet. "Not sure of impact here yet."

Oil prices dropped after the release of the Chinese economic data. U.S. oil benchmark West Texas Intermediate crude futures fell, pressuring energy names. Occidental Petroleum closed 3.8% lower, while Exxon Mobil and Chevron both lost more than 1%.

The yield on the benchmark 10-year Treasury note dipped to 1.26% Monday afternoon as investors worried about global growth. Bond yields fall as their prices rise.

Bank stocks trended lower as the 10-year yield fell. Bank of America shed 0.8%, JPMorgan edged 0.6% lower and Goldman Sachs dropped nearly 0.6%.

Tesla's stock retreated 4.3% after the National Highway Traffic Safety Administration announced a formal probe into the electric vehicle maker's Autopilot partially automated driving system.

Shares of Moderna, which are up more than 250% this year, closed more than 4% lower.

U.S. stocks also pulled back amid growing support within the Federal Reserve to announce a tapering of its bond purchases in September and begin the reduction in buying a month or so after. Interviews with central bank officials, along with their public comments, show growing support for a faster taper timeline than markets had expected a month ago.

The major stock indexes for much of the last month have ground to new records on the back of robust corporate earnings results. The S&P 500 has closed at a record high 49 times this year out of 156 trading days, or 31% of the time — the most frequent closing highs on record back to 1950.

Eighty-seven percent of S&P 500 companies have reported positive earnings per share surprises for the second calendar quarter, according to FactSet as of Friday. If 87% is the final percentage, it will mark the highest percentage of S&P 500 companies reporting positive EPS surprises since FactSet began tracking this metric in 2008.

"These are the dog days of August, and low volume and directionless volatility are the order of the moment with 2Q21 earnings season mostly behind us," Raymond James' Tavis McCourt said in a note.

— With reporting by CNBC's Yun Li and Evelyn Cheng.