Stocks turn higher to trade at records as investors look ahead to earnings

U.S. stocks shook off earlier losses to trade higher on Monday as investors awaited signs of a further rebound in corporate profits with the start of second-quarter earnings season this week.

The S&P 500 and Nasdaq each set all-time intraday highs. The Dow erased earlier losses to gain about 0.3%, or more than 100 points. The 10-year Treasury yield steadied around 1.35%, recovering after dipping to a five-month low of below 1.3% last week.

Major companies will begin releasing their second-quarter results beginning on Tuesday with the big banks JPMorgan Chase (JPM) and Goldman Sachs (GS). With results fueled by strengthening consumer demand as pandemic-related restrictions eased early this year, S&P 500 companies are expected to see aggregate earnings grow by 64% over last year, according to FactSet. This would accelerate from the first quarter’s growth rate of about 50% and mark the fastest pace for the index since 2009. 

According to Goldman Sachs strategist David Kostin, investors should be focused on three main questions for companies heading into earnings season: How firms will maintain profit margins given rising input costs and supply chain shortages, how companies plan to prioritize cash spending, and how policy uncertainties especially around taxes affect their outlooks. 

“Global shipping woes, raw material inflation as well as acute shortages in both labor and semiconductors have combined to increase costs for companies across the economy, ” Kostin wrote in a note on Monday. “Investors have started to reward companies with attractive margin profiles.” 

In addition to earning season, this week will also see Federal Reserve Chair Jerome Powell testify before Congress with his semi-annual Monetary Policy Report on Wednesday and Thursday. Pundits expected the central bank leader to strike a more dovish tone on the economic recovery and monetary policy compared to his other recent public remarks, given the mixed June jobs report out earlier this month and last week’s Fed minutes showing a central bank divided on the topic of tapering. Additional economic reports on consumer price inflation and retail sales out this week are also expected to underscore an economic recovery capped by supply and demand imbalances and elevated inflation during the reopening. 

“I think the recovery is on track, it’s really just the rate of change that has slowed,” Kathy Jones, Charles Schwab chief fixed income strategist, told Yahoo Finance. “And we couldn’t continue to grow at 9% to 10% GDP growth every quarter, so obviously it’s going to slow down.”

“I think one of the things that got into markets that got [Treasury] yields tumbling was maybe the fact that the Fed was going to hike rates sooner than anticipated,” she added. “That sends a signal to the long end of the bond market that maybe the Fed isn’t going to tolerate higher inflation for longer and that they’re going to step on the brakes sooner rather than later … we don’t think that’s going to be the case though. We think the economy’s doing well, yields will probably bounce back.” 

4:05 p.m. ET: S&P 500, Dow and Nasdaq set record closing highs as investors await earnings

Here were the main moves in markets as of 4:05 p.m. ET:

  • S&P 500 (^GSPC): +15.07 (+0.34%) to 4,384.62

  • Dow (^DJI): +126.02 (+0.36%) to 34,996.18

  • Nasdaq (^IXIC): +31.32 (+0.21%) to 14,733.24

  • Crude (CL=F): -$0.41 (-0.55%) to $74.15 a barrel

  • Gold (GC=F): -$4.00 (-0.22%) to $1,806.60 per ounce

  • 10-year Treasury (^TNX): +0.7 bps to yield 1.3630%

11:55 a.m. ET: Broadcom shares rise on report of SAS Institute deal

Shares of Broadcom (AVGO) gained more than 1.5% intraday on Monday after the Wall Street Journal reported that the software company was in discussions to purchase SAS Institute. 

The deal could be valued at between $15 billion and $20 billion, according to the report.

10:57 a.m. ET: Stocks push higher, S&P 500 and Nasdaq at record highs 

The three major indexes pushed higher mid-morning in New York on Monday, with both the S&P 500 and Nasdaq eking out all-time highs. 

The real estate, financials and healthcare sectors led modest gains in the S&P 500, while energy, consumer staples and utilities sectors were still in the red. Goldman Sachs, Disney and JPMorgan Chase outperformed in the 30-stock Dow, with the rise in the bank stocks coming a day ahead of their earnings results.  

10:15 a.m. ET: Virgin Galactic shares dive after company says it may sell up to $500 million in stock after test flight with Branson

Shares of Virgin Galactic (SPCE) took a sharp turn lower Monday morning to trade more than 12% lower after rising in early trading, after the company completed a successful test flight with founder Sir Richard Branson on board for the first time.  

Capitalizing on hype around the stock heading into the test flight, the company said in a filing Monday it planned to sell up to $500 million in stock to investors. Any funds raised would be used “for general corporate purposes, including working capital, general and administrative matters and capital expenditures for its manufacturing capabilities, development of its spaceship fleet and other infrastructure improvements,” Virgin Galactic said in the filing. 

The test flight with Branson was seen as a key milestone for the company before re-launching ticket sales for commercial space flights with paying passengers, which have been on hold since 2014. As of earlier this year, the company had around 600 reservations already for “future astronauts,” with tickets having sold for up to $250,000 each. Shares of Virgin Galactic had more than doubled for the year-to-date through Friday’s close. 

9:30 a.m. ET: S&P 500, Dow pull back from records while Nasdaq gains

Here’s where markets were trading shortly after the opening bell:

  • S&P 500 (^GSPC): -0.9 points (-0.02%) to 4,368.65

  • Dow (^DJI): -66.74 (-0.19%) to 34,803.42

  • Nasdaq (^IXIC): +30.9 (+0.21%) to 14,590.83

  • Crude (CL=F): -$0.97 (-1.3%) to $73.59 a barrel

  • Gold (GC=F): -$7.40 (-0.41%) to $1,803.20 per ounce

  • 10-year Treasury (^TNX): -0.8 bps to yield 1.348%

7:24 a.m. ET Monday: Stock futures point to a mixed open

Here’s where markets were trading Monday morning: 

  • S&P 500 futures (ES=F): 4,349.5, -10.5 points (-0.24%)

  • Dow futures (YM=F): 34,604.00, -147.00 points (-0.42%)

  • Nasdaq futures (NQ=F): 14,841.75, +31.25 points (+0.21%)

  • Crude (CL=F): -$1.23 (-1.65%) to $73.33 a barrel

  • Gold (GC=F): -$10.00 (-0.55%) to $1,800.60 per ounce

  • 10-year Treasury (^TNX): -1.2 bps to yield 1.344%

Photo by: zz/STRF/STAR MAX/IPx 2021 3/21/21 Atmosphere in and around Wall Street and The New York Stock Exchange in the Financial District of Lower Manhattan, New York City on March 21, 2021 during the worldwide coronavirus pandemic. Here, The New York Stock Exchange Building. (NYC)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck