(Bloomberg) — The start of a busy week for Corporate America saw stocks giving up most of their gains, with traders looking for signs of resilience in earnings amid tariff risks. Treasury yields fell alongside the dollar.
While the S&P 500 closed above 6,300 for the first time, the gauge rose just 0.1%. Energy shares joined a decline in oil. Chipmakers almost erased their advance as Nvidia Corp. slipped. Fellow megacaps Tesla Inc. and Alphabet Inc. will kick off the group’s earnings season this week. The stakes will again be high as investors look for updates on artificial-intelligence spending.
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Gains in Treasuries were led by longer maturities, with the 30-year yield down four basis points to 4.95%. The dollar slid against all of its developed-world peers. The yen climbed as Japan’s Prime Minister Shigeru Ishiba said he would carry on as leader even as the ruling coalition lost its majority in the upper house election.
Investors also kept a close eye on tariff headlines. President Donald Trump may issue more unilateral tariff letters before Aug. 1, White House Press Secretary Karoline Leavitt said. More trade deals may also be reached before the deadline, she added.
To Matt Maley at Miller Tabak, it is becoming more evident that the Trump Administration is going to be tougher on the tariff issue going forward. So, it’s important to decide whether this is something the stock market is pricing in right now.
“Earnings season will move into full swing this week, and the guidance will be more important than usual,” he said. “This guidance is going to have create a very large increase in earnings estimates if the market is going to reach some of the targets that exist on Wall Street right now.”
The S&P 500 is looking at a double-digit increase in the second half of the year, powered by the resilient strength of America’s technology behemoths, according to Wells Fargo Securities’ Christopher Harvey.
“What we’re seeing is the winners continue to win,” Harvey said Monday in an interview on Bloomberg Surveillance. “The uber-cap companies have the higher margins, are gaining more market share. There is a real secular trend in AI that will continue.”
The second-quarter earnings season is off to a ripping start, with consumer strength powering resilient corporate profits. Yet after hitting a series of all-time highs, the S&P 500 is trading around 22 times expected 12-month profits, leaving little room for error.
“While stocks may be due for a breather, we believe the bull market remains intact,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “We maintain our June 2026 S&P 500 price target of 6,500, and recommend using volatility as an opportunity to phase into markets.”
Morgan Stanley strategists led by Michael Wilson advise investors to stay bullish on US stocks, as earnings momentum, positive operating leverage and cash tax savings are under-appreciated tailwinds.
Recent dollar weakness should provide a small tailwind to S&P 500 earnings, partially offsetting the tariff earnings pressure, Goldman Sachs Group Inc. strategists led by David Kostin said.
“Although valuations are elevated, a large component of the S&P 500 consists of large cap tech stocks which command higher multiples due to their consistent growth, incredibly strong cash flows and profit margins,” said Richard Saperstein at Treasury Partners. “Valuation isn’t a reliable indicator for future market direction.”
The combination of declining inflation, continued growth and stable interest rates is a trifecta of positives that supports current stock market valuations, he noted.
“Most of the Magnificent Seven should continue leading the market due to impressive earnings growth, copious levels of cash flow and continued demand for their businesses,” he said. “The AI tailwinds are in the early innings, and are set to benefit the biggest players in tech the most.”
Deutsche Bank AG strategists including Parag Thatte see resilient earnings growth suggesting room for equity positioning to keep rising.
The S&P 500 hasn’t posted a 1% up or down day since late June, and Mark Hackett at Nationwide notes that volatility gauges also remain “suspiciously quiet.”
“This calm is unusual and may reflect both investor fatigue and institutional hesitation to fight the current trend,” he said. “We’re in a window where calm can quickly turn to complacency. While a break in either direction is possible, current positioning suggests we’d bet on a rally before a drop.”
Corporate Highlights:
- Hackers exploited a security flaw in common Microsoft Corp. software to breach governments, businesses and other organizations across the globe and steal sensitive information, according to officials and cybersecurity researchers.
- Verizon Communications Inc. posted second-quarter revenue that surpassed analysts’ estimates and raised its profit outlook, buoyed by wireless price increases and recent tax legislation.
- Block Inc. rallied as the firm is set to join the S&P 500, a milestone that underscores the growing influence of digital payments and crypto in mainstream finance.
- Domino’s Pizza’s launch of its Parmesan stuffed-crust pizza attracted new customers and boosted the company’s same-store sales, company executives said on its earnings call.
- Opendoor Technologies Inc. soared on Monday, extending its gravity-defying rally from last week, as investors continued to pile into the stock that has found a sudden fandom among retail traders and social-media platforms.
- Elliott Investment Management has built up its stake in Equinix Inc. and is pushing the data center operator to take steps to boost its share price, people with knowledge of the matter said.
- BP Plc, under pressure from activist investor Elliott Investment Management to improve its performance, appointed the former boss of a building-materials company as its new chairman, replacing Helge Lund.
- Shares of global consumer intelligence platform NIQ Global Intelligence Plc are expected to start trading this week, and their performance could open the door for other private equity-backed companies weighing going public.
- GE Vernova Inc. is acquiring French software company Alteia SAS as the maker of power generation equipment looks to use artificial intelligence for ways to strengthen the electric grid.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.1% as of 4 p.m. New York time
- The Nasdaq 100 rose 0.5%
- The Dow Jones Industrial Average was little changed
- The MSCI World Index rose 0.2%
- Bloomberg Magnificent 7 Total Return Index rose 0.7%
- The Russell 2000 Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.6% to $1.1690
- The British pound rose 0.5% to $1.3484
- The Japanese yen rose 1% to 147.38 per dollar
Cryptocurrencies
- Bitcoin fell 1.1% to $116,813.69
- Ether fell 0.2% to $3,734.1
Bonds
- The yield on 10-year Treasuries declined three basis points to 4.38%
- Germany’s 10-year yield declined eight basis points to 2.61%
- Britain’s 10-year yield declined seven basis points to 4.60%
- The yield on 2-year Treasuries declined one basis point to 3.86%
- The yield on 30-year Treasuries declined four basis points to 4.95%
Commodities
- West Texas Intermediate crude fell 0.5% to $67.03 a barrel
- Spot gold rose 1.5% to $3,398.78 an ounce
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