Banks led stocks to modest gains on Wall Street Monday, nudging the major stock indexes to more record highs ahead of a busy week of corporate earnings reports from big U.S. companies.
The S&P 500 gained 0.3% after bouncing back from an early stumble. The benchmark index, which has notched three straight weekly gains, hit a new high, as did the Dow Jones Industrial Average and Nasdaq composite. The indexes have managed multiple new highs despite choppy trading in recent weeks.
Banks, communication stocks and companies that rely on consumer spending accounted for much of the S&P 500's broad gains. A mix of companies selling household goods fell. Energy stocks also closed lower, following a pullback in U.S. crude oil prices. Trading was muted overall, with a few stocks making big moves on little news.
Wall Street is focusing on a wave of earnings reports coming out this week. Investors will be closely watching what companies say about the future, now that the economy is shaking off the worst impact from the pandemic and companies have a clearer view ahead.
"The market has an expectation for the economy and interest rates and it's a matter of whether company's are going to acknowledge this or are they going to be cautious," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. "The market would like to see some certainty."
The S&P 500 index rose 15.08 points to 4,384.63. The Dow added 126.02 points, or 0.4%, to 34,996.18, while the Nasdaq gained 31.32 points, or 0.2%, to 14,733.24.
Small-company stocks lagged the rest of the market. The Russell 2000 index slipped 1.82 points, or 0.1%, to 2,281.83.
Treasury yields moved higher. The yield on the 10-year Treasury note rose to 1.37% from 1.35% late Friday.
L Brands rose 4.2% after the company's board approved splitting the Victoria's Secret and Bath & Body Works units into two separate companies. Virgin Galactic fell 17.3% after it followed up a successful spaceflight Sunday with plans to sell up to $500 million in stock.
Earnings season kicks off this week. The big Wall Street banks report their results starting Tuesday, beginning with JPMorgan Chase and Goldman Sachs. Also reporting this week will be Bank of America, Citigroup and Wells Fargo. A handful of other big companies report this week, including Delta Air Lines, PepsiCo and UnitedHealth Group.
Expectations are high this quarter for publicly traded companies. The pandemic is waning, and all of the United States effectively reopened again in the last quarter as vaccine availability became widespread. Investors will be looking to see not only what sort of profits these companies brought in the last three months, but also what their outlook is now that things are normalizing.
Corporate earnings are expected to be up 64% from a year earlier, according to FactSet. That would be the biggest year-over-year growth since 2009, when corporate profits started recovering from the Great Recession.
Ultimately investors are going to need these companies to deliver this season. Stocks have risen sharply in the past year on the backs of expectations that corporate profits would rebound once the pandemic ends. Without strong profits, it will be increasingly difficult for investors to justify these high stock prices and record market valuations.
"This needs to be more of a confirmation process this earnings season," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
As investors keep an eye on corporate earnings, there are also lingering worries about the highly contagious delta coronavirus variant that is spreading quickly across much of the world. Places in the U.S. being hit particularly hard by the delta variant include the South, where vaccine hesitancy and resistance is more common. There are some worries that these areas may have to reimpose restrictions.