The S&P 500 rose slightly to start the week Monday as traders assessed ongoing debt ceiling negotiations.
The broader index added 0.3% to 4,136.28. Meanwhile, the Dow Jones Industrial Average snapped a five-day losing streak, gaining 47.98 points, or 0.14%, to 33,348.60. The tech-heavy Nasdaq Composite outperformed, rising 0.66% to 12,365.21.
In focus for investors were debt ceiling talks, which were postponed to this week from Friday. President Joe Biden is expected to host top congressional leaders on Tuesday.
"It's kind of a waiting game," said Globalt Investments' Keith Buchanan. "Each day that goes by, and each postponement, each day there's not a development … I think it will grow more and more difficult for the markets to really get any traction."
Treasury Secretary Janet Yellen told CNBC last week that failure to hatch an agreement on the debt ceiling would "produce financial chaos," with the Treasury currently giving June 1 as the date when it could fail to meet its obligations.
However, Yellen further hinted over the weekend that the U.S. would avoid a default.
"I'm hopeful. I think the negotiations are very active. I'm told they have found some areas of agreement," said Yellen in an interview with The Wall Street Journal on Saturday from Japan during a meeting of G-7 finance ministers.
On Monday, investors digested the May data for Empire State Manufacturing survey, which showed a collapse in manufacturing activity in New York. The survey fell about 43 points from April to a reading of -31.8, below the Dow Jones estimate of -5.
Elsewhere, corporate earnings season is drawing to a close, but some major retail reports this week will give investors further insight into the state of the consumer. Home Depot reports Tuesday. Target and Walmart are set to report Wednesday and Thursday, respectively.
Stocks close higher Monday
Cathie Wood's ARK Innovation ETF rallies 2.4%, gains for 7th day in 8
Cathie Wood's flagship ARK Innovation ETF rallied 2.4% Monday and posted its 7th advance in the past eight sessions.
Elsewhere in growth-land, the Nasdaq Composite added 0.66%, outperforming the S&P 500 and the Dow Industrials and climbing for a 3rd day in four.
— Chris Hayes, Scott Schnipper
Bank of America says a ‘May dip’ is ahead
Bank of America says a late-May dip will come ahead of a summer dip.
"The SPX shows resistance near 4177-4195. Two bearish weekly hanging men candlesticks represent a stall near this resistance, increasing the risk of a May dip," analyst Stephen Suttmeier wrote in a Monday note.
He added that "An expansion in the percentage of Russell 2000 stocks reaching new 52-week lows is a big risk for Russell 2000 and small cap stocks."
The analyst said that a similar expansion of new lows on the broad market index "would suggest that the contagion of weaker small cap breadth is moving up in terms of market cap, which would have more significant bearish implications for US equities."
— Hakyung Kim
Investors pulled back from U.S. equity funds in April, but jumped into risky high-yield bonds
U.S. equity funds lost about $5 billion in April, marking a sixth consecutive month of outflows, according to Morningstar's monthly fund flow report.
In particular, large value funds saw the sharpest inflows last month, losing $6.9 billion. "Momentum for these funds might be waning as growth stocks have rebounded in 2023," said Adam Sabban, senior manager research analyst, equity strategies at Morningstar.
But investors still had an appetite for risk, as they plowed $6.7 billion into high-yield bond funds. These funds tend to pick up flows as stocks rise and shed money as equities fall.
Investors also poured about $23 billion into taxable bond funds in April, bringing total year-to-date flows into these funds to $95 billion, Morningstar found. "While that sum led all category groups by a wide margin, taxable-bond funds still have work to do to claw back their 2022 outflows," Sabban said.
S&P 500 rises slightly in the final hour of trading
Stocks could see big gains after narrow trading range, Bespoke says
Saying the S&P 500's been in a lull is an understatement. Bespoke Investment Group said the broader market index's trailing 30-day intraday high-low percentage spread last week reached its narrowest level going back to October 2018.
This comes as traders await for new developments on U.S. debt ceiling negotiations, as well as clues on the future path of monetary policy. However, there may be a silver lining to this tight trading range.
Bespoke found that the S&P 500 averages a 2.2% gain one month after trading at such a narrow range. That gain goes up to 5.4% and 13.1% after six and 12 months, respectively.
— Fred Imbert
This earnings season marks the 'lowest' number of S&P 500 companies discussing inflation since 2021, FactSet data shows
A notable trend has already surfaced as corporate earnings season wraps up — fewer S&P 500 companies are mentioning inflation on their conference calls, according to FactSet data.
Only 278 S&P 500 companies cited inflation in their first-quarter earnings calls, according to a FactSet review of transcripts from March 15 to May 11. While that figure is above the 5- and 10-year average, it's actually the lowest number of S&P 500 companies going back roughly two years.
"It should be noted that this is the lowest number of S&P 500 companies citing "inflation" on earnings calls going back to Q2 2021 at 222 (using current constituents and going back in time)," John Butters wrote in a Monday note. "It also marks the third consecutive quarter in which the number of S&P 500 companies citing the term 'inflation' has declined quarter-over-quarter."
To be sure, roughly 40 S&P 500 companies have yet to report, read the note. Nevertheless, the final tally will still fall below the 352 figure from the prior quarter.
— Sarah Min
Money market fund flows swelled as spooked depositors fled banks following SVB’s collapse
Since the March 10 collapse of Silicon Valley Bank in March, investors have yanked deposits from banks and plowed their cash into money market funds, according to analysis by Keefe Bruyette & Woods.
Since the Federal Reserve began its latest rate-hiking campaign more than a year ago, safer assets have been paying higher yields. This is the case for short-term Treasury bills – and products like money market funds and certificates of deposit that are in competition for savers' dollars.
The SVB debacle accelerated the trend of dollars flowing out of banks and cash flowing into money market funds, KBW found. Since then, money market funds have grown by more than $434 billion as of May 10, while total bank deposits have dropped $455 billion as of May 3, according to the firm.
"Money market funds are offering an attractive alternative for depositors seeking higher yield returns than bank deposit rates," KBW noted. "Banks are losing funding with rates paid on liquid deposits that are hundreds of basis points lower than money market funds offering yields near or even above 5%."
BofA looks at which office REITs are keeping their buildings full
Bank of America put out a note Monday that reviewed the first-quarter earnings reports from the 14 office REITs it covers. Corporate Office Properties Trust is the clear standout on occupancy levels, analyst Camille Bonnel said. It has grown and held occupancy at around 93%. That compares with a sector portfolio that has fallen 80 basis points from the prior quarter to a rate of 87.5% — a 525 basis point decline from pre-pandemic levels.
"Positively, most REITs noted a pickup in leasing pipelines in recent weeks," Bonnel said.
Some in the industry still continue to expect that remote work may become less common once there is a labor market correction. If that's true, the pressure on office REITs could ease over time.
—Christina Cheddar Berk
There are six new S&P 500 highs
Of the six S&P 500 stocks that reached fresh peaks on Monday, five of them were trading at their all-time highs. Here are their names:
- General Mills trading at all-time highs back to when it began trading on the NYSE in 1928
- Lamb Weston Holdings trading at its highest levels back to its IPO in Nov, 2016
- Pepsico trading at all-time highs back to Pepsi-Cola's merger with Frito-Lay in 1965 to form Pepsico
- Arthur J Gallagher trading at all-time high levels back to its IPO in June, 1984
- Boston Scientific trading at all-time high levels back to its IPO in May, 1992
- Oracle trading at levels not seen since Dec, 2021
Meanwhile, there were five new S&P 500 52-week lows:
- Newell Brand trading at lows not seen since Apr, 2009
- Catalent trading at lows not seen since Mar, 2020
- Danaher trading at lows not seen since Apr, 2021
- Organon trading at all-time lows back to its spin-off from Merck in June, 2021
- Pfizer trading at lows not seen since Apr, 2021
— Chris Hayes, Sarah Min
See the stocks making the biggest midday moves
These are some of the stocks making the biggest moves in midday trading:
- Shake Shack — The fast food chain's stock jumped more than 6% after the Wall Street Journal reported that activist investor Engaged Capital is planning a proxy fight for three board seats at the company. Engaged Capital bought a 6.6% stake in Shake Shack, including swaps.
- Western Digital — Western Digital advanced 8% in midday trading. A Reuters report said the firm is ramping up merger talks with computer memory company Kioxia Holdings
- Charles Schwab — The brokerage climbed 3% midday after Raymond James upgraded the stock and said it can rally almost 30%, as concerns about stability in U.S. banks have not affected Schwab's ability to attract new accounts and assets.
— Alex Harring
S&P 500 sectors are split during midday trading
The S&P 500 was flat during midday trading, and a look under the hood showed the benchmark was about evenly split between gainers and decliners.
Just six out of 11 sectors in the broader index were trading in positive territory. Information technology, financials and materials stocks outperformed, gaining about 0.5%, 0.4% and 0.3%, respectively.
Utilities was the biggest laggard, down 1.5%. Health care stocks also fell, lower by 0.5%.
— Sarah Min
Regional banks outperform in the S&P 500, but on weak trading volume
Regional banks outperformed in the S&P 500 on Monday, but trading volume was lackluster.
Financials stocks rose 0.4% during midday trading. Shares of Comerica led the sector with a 5.8% gain, but trading volume was just north of 1.7 million shares — below the 30-day average of 4.7 million shares.
KeyCorp shares rose 5.7%. Trading volume for the bank was around 9.6 million shares, while shares typically trade around 26.8 million shares, according to the 30-day trading average.
— Sarah Min
Deutsche Bank upgrades DuPont, cites 'valuation discount'
Deutsche Bank is getting more bullish on shares of DuPont, citing the chemicals company's valuation discount to its peers.
"Since we downgraded DuPont in mid-January, the shares are down 15% versus a 3% gain for the S&P," wrote analyst David Begleiter in a Monday note to clients. "As a result, DuPont's shares now trade at a 50% discount to its peers."
Given this backdrop, the bank upped its price target on shares to $80, reflecting 25% upside from Friday's close. The stock rose 2% on Monday.
The analyst said "superior" earnings growth in 2024 and lower levels of mergers and acquisition activity should justify the price target and expectations for its multiple expansion.
— Samantha Subin
Tapestry rises after Bernstein upgrade
Tapestry shares popped more than 4% after Bernstein analyst Aneesha Sherman upgraded the Coach parent to outperform from market perform. Her price target of $55 per share also implies upside of 33.5% from Friday's close.
"Our near-term concerns are dissipating: N.Am demand weakness played out, Inventory under control, China demand surging," Sherman wrote. "Since our January downgrade, the three areas we were monitoring have all improved: N.Am weakness has played out for 2 Qs and is baked into guide/Cons, Inventory is back under control and now declining vs. sales, and China is poised to grow +50% in Q4 on reopening handbag demand."