Stocks were higher Monday as Wall Street braced for quarterly reports from some of the biggest companies in the world.
The Dow Jones Industrial Average traded added 76.32 points, or 0.22% to end at 34,585.35 — its highest closing level in 2023. The S&P 500 climbed 0.39% to finish the session at 4,522.79, while the Nasdaq Composite advanced 0.93% to 14,244.95.
The second-quarter earnings season gains steam this week with results from big financial institutions such as Bank of America, Morgan Stanley and Goldman Sachs. Results are also due from United Airlines, Las Vegas Sands and technology giants Tesla and Netflix.
Wall Street expects a gloomy season with lower profits. Analysts forecast a more than 7% decline in S&P 500 earnings from a year ago, according to FactSet.
This week also ushers in the Federal Reserve's "blackout period" ahead of its July policy meeting. Traders anticipate a roughly 97% chance the central bank increases interest rates later this month, after pausing hikes in June, according to CME Group's FedWatch tool.
"I think the market is kind of overjoyed with the disinflationary, soft landing scenario," Ed Yardeni, president of Yardeni Research said on CNBC's "Squawk Box" Monday. "I've been thinking for quite some time that we're in a recession, but I argued that it's a rolling recession, not an economy-wide recession. Now I think we're in a rolling recovery."
The moves came on the heels of solid big bank earnings and softer inflation reports that lifted investor sentiment. That heightened some hopes the central bank may be able to tamp down inflation without tipping the economy into a recession.
Stocks close higher
Stocks closed higher on Monday as traders remain optimistic off of encouraging inflation data last week.
— Brian Evans
Chocoholics lament: Cocoa outperforming almost every other commodity in 2023.
Cocoa is having one of those moments that make chocoholics wince.
So far this year, through Friday, cocoa futures in the U.S. are almost 29% higher, second only to orange juice futures (up 33.5%) in year-to-date performance among all commodities: energy, base and precious metals and foodstuffs. In June, cocoa prices reached a seven-year high.
Analysts at Citigroup on Monday raised their cocoa forecasts for the next six quarters, including 19% in the current third quarter, 23% in Q4 and another 22% in the first quarter of 2024. "Money managers continue to roll a hefty long position on the back of West African supply risks, [El Niño-Southern Oscillation] cycle weather premiums that could hit the region in 4Q, and still positive global demand which is weak but has not yet rolled over sufficiently to curtail prices," Citi wrote. "It seems unlikely ICE cocoa markets will sell-off meaningfully in 2H 2023."
Longer term, global climate change (higher temperatures, less rainfall) is expected to lessen the amount of land suitable to grow cocoa in West Africa, where the Ivory Coast could lose as much as 40% of its crop and Ghana 20% by mid-century. Higher prices eventually curb demand: Hershey is up about 3% in 2023, Nestle by 5.5% and Mondelez by 8% — all underperforming the S&P 500.
— Scott Schnipper, Gina Francolla, Christopher Hayes
JPMorgan's Kolanovic sees lower recession risk near term
JPMorgan's Marko Kolanovic isn't as bearish as he was before.
The bank's strategist noted that, "while the growth lift from normalizing services demand and commodity prices should fade, the resilience of the US and global expansions should remain in place. ... We thus downplay near-term recession risks."
To be sure, he added that he remains skeptical "that a soft landing can be achieved in which inflation returns to central bank comfort zones on a sustained basis without a downturn."
Kolanivic has been a bear during this year's market rally. Earlier this month, he noted that "this benign and complacent pricing of recession risk, along with increasing signs that a credit cycle is emerging, makes us turn more negative on corporate bonds and more positive on government bonds."
— Fred Imbert, Michael Bloom
Goldman cuts recession probability
Goldman Sachs' Jan Hatzius lowered his recession projection to 20% from 25%, noting "the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession."
The economist's comments come after two reports last week showed inflation rose less than expected, boosting the stock market. The S&P 500 had its biggest one-week gain since June last week.
The "US economic activity remains resilient, with Q2 GDP growth tracking 2.3%," Hatzius said. "We do expect some deceleration in the next couple of quarters, mostly because of sequentially slower real disposable personal income growth. ... But the easing in financial conditions, the rebound in the housing market, and the ongoing boom in factory building all suggest that the US economy will continue to grow, albeit at a below-trend pace."
— Fred Imbert, Michael Bloom
Crypto stocks have been outperforming bitcoin for the past month
Over the past month bitcoin has gained about 13%, according to Coin Metrics. In the same period, crypto exchange Coinbase has climbed 91%, bitcoin proxy Microstrategy has advanced 55%, and miners Marathon Digital and Riot Platforms are up 73% and 78%, respectively.
Bernstein analyst Gautam Chhugani pointed out that this could be because crypto equities underperform in a downtrend and "can potentially outperform" in an uptrend, in a note Monday. He also suggested prices may have climbed due to a short squeeze coming from traditional investors.
"U.S based equity investors have been largely crypto bears, in view of the regulatory headwinds," he said. "Thus, when Blackrock and others filed for the BTC ETF, and this was followed by the unexpected favorable Ripple ruling, most equity investors were left surprised, leading to sharper moves with crypto related stocks than underlying crypto."
"We still don't see new capital entering the on-shore U.S. crypto market," he added. "We expect some of this momentum to pick up earliest by Q4'24 with some more evidence of institutional participation into the new crypto cycle or positive momentum on the ETFs."
— Tanaya Macheel
Tech software ETF reaches a new 52-week high
The iShares Expanded Tech-Software Sector ETF added 1.2% Monday, hitting a new 52-week high.
The ETF, which has targeted exposure to software, interactive media and related companies, has gained almost 42% in 2023. Meanwhile, the VanEck Semiconductor ETF also gained more than 1% as of Monday afternoon, amid a 56.3% year-to-date rally.
— Hakyung Kim
Cathie Wood writes down her Twitter stake by 47%, WSJ says
ARK Invest's Cathie Wood said she has written down her stake in Twitter by 47% since Elon Musk's buyout last year, the investor told The Wall Street Journal Monday. Ark owns a small stake in Twitter in the ARK Venture Fund.
Wood said she "absolutely" had to write it down because she takes fair valuation very seriously. However, she said she is still bullish on Twitter long term, and wants to buy more shares at these depressed levels.
— Yun Li
Goldman adds Baidu to conviction buy list
Baidu is one of the best positioned China internet companies pivoting to the secular generative artificial intelligence theme, Goldman Sachs said in a note Sunday. The firm added Baidu to its regional conviction buy list and boosted its price target to $197 per share, from $183, suggesting 32% upside from Friday's close.
Baidu's earnings will remain on an upward revision cycle, with room for valuation multiple expansion supported by a "lineup of upward catalysts," analyst Lincoln Kong wrote.
"We forecast Baidu to deliver healthy revenue growth and margin performance over a
multi-year investment cycle," he said. The company's A.I. cloud will benefit from structural growth opportunities from enterprise consumers and its ad margins will further improve, he noted.
U.S.-listed shares of Baidu are up about 30% year to date.
— Michelle Fox
Nvidia's huge 2023 rally can continue, Citi says
Don't expect Nvidia's shares to lose steam after rallying to all-time highs this year, Citi said.
Analyst Atif Malik raised his price target by $100 to $520 while maintaining his buy rating. Malik's target implies an upside of 14.4% over the next year.
And his bull case shows the potential for even more of an advance ahead at $600 per share.
CNBC Pro subscribers can read more about his predictions for the stock and how they compare to the rest of Wall Street here.
— Alex Harring
Upside could be limited for PepsiCo as investors better appreciate strengths, Morgan Stanley warns
PepsiCo's good attributes are now fairly priced into the stock following its strong earnings report last week, according to Morgan Stanley. That could mean limited upside ahead for the food-and-drink maker.
Analyst Dara Mohsenian downgraded the food-and-beverage giant to equal weight from overweight. Still, his $210 price target implies shares have a potential upside of 11.6%.
"We typically like recommending names where we can point to discrete points the market is not pricing in," he said in a note to clients.
Read more about why Mohsenian thinks upside may be harder to find going forward for the stock here.
— Alex Harring
How the Nasdaq 100 rebalance impacts Megacap Tech
Details are starting to trickle out about the Nasdaq 100 rebalance, which will become effective on July 24.
According to Goldman Sachs, Nvidia and Microsoft are the stocks that will see the biggest downward adjustments as part of the rebalance, and Apple will be the largest stock in the group, but with a smaller weighting than it currently has.
Read more about the changes to the index and the potential impact on stocks at CNBC Pro.
— Jesse Pound
Ford cuts prices on F-150 Lightning pickup trucks, shares fall
Ford shares were down 5% after the automaker cut prices on its electric F-150 Lightning pickup trucks by as much as $10,000. That would be the stock's worst day since February.
But while this may be a negative for Ford, Adam Crisafulli of Vital Knowledge sees it as a "big macro positive" for the market. He said this points to "improved supply chain conditions, lower input costs, higher output, and reduced consumer prices."
"This dichotomy (macro tailwinds but micro headwinds) gets to the heart of the dilemma facing investors right now," he said.
— Fred Imbert, Michael Bloom
Stocks making the biggest midday moves
Here are some of the names making big moves in midday trading:
- Ford — Shares dropped 5% after the automaker said prices on its electric F-150 Lightning pickups would fall as much as $10,000.
- Black Knight — The stock jumped nearly 14% after Black Knight said it will sell its Optimal Blue business to a subsidiary of Constellation Software for $700 million, paving the way for its acquisition by Intercontinental Exchange.
- BridgeBio Pharma — The biopharma stock soared nearly 83% after the company's announced that its heart disease drug showed a significant improvement in patients du