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Dow ticks higher as Nasdaq nears record territory

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U.S. stocks held their ground early Monday after the S&P 500 finally closed above the 5,000 mark at the end of last week, in the 10th record finish for 2024, as investors awaited inflation data due this week.

What’s happening

The Dow Jones Industrial Average
DJIA
rose 111 points, or 0.3%, to 38,783.

The S&P 500
SPX
gained 10 points, or 0.2%, to 5,036.

The Nasdaq Composite
COMP
was up 51 points, or 0.3%, at 16,042.

The S&P 500 rose 1.4% last week, ending Friday above the 5,000 threshold for the first time. The Dow eked out a weekly gain of less than 0.1%, while the Nasdaq jumped 2.3%, ending Friday just 0.4% below its record close of 16,057.44, set on Nov. 19, 2021.

See: S&P 500 reaches 5,000 for first time. Here’s what it means for the market.

Market drivers

The speed and scope of the stock-market rally, with the S&P 500 rallying more than 7% over the course of five weeks, is making some traders nervous.

“Most people will be fixated on this week’s inflation numbers, but there’s also a potential tug-of-war between how extended the current market rally may be versus the buzz surrounding the S&P 500 topping 5,000,” said Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley.

“While it’s true the S&P has often pushed higher after crossing ’round-number’ thresholds like this one, it hasn’t always done it after the type of rally that has unfolded since late October,” he said in emailed comments.

Larkin noted that since 1968, whenever the S&P rallied at least 20% over a 70-trading-day period, as it did between Oct. 27 and last Thursday, “more often than not it was lower two weeks later.”

Two-thirds of the way through fourth-quarter earnings season, 76% of companies have beaten bottom-line estimates, analysts at Jefferies said.

“Though we spend plenty of time thinking, analyzing and charting indicators of sentiment, flows, performance and economic health, the reality is that earnings revisions really do the best job of divining what direction stocks are likely to go in. And that leads us to flag that it’s probably fundamentals, more than anything else, that are perpetuating the rally that started late last year,” said Andrew Greenbaum, senior vice president of equity product management at Jefferies.

Market Extra: Stocks have been moving a lot more than usual after earnings. Here’s why, and what it could mean.

Tuesday’s release of consumer-price-index data could derail those fundamentals.

Also see: The first big inflation report of 2024 is coming out. Here’s what the CPI is likely to show.

“The [Federal Reserve] continues to look forward to rate cuts to offset an expected tightening of financial conditions as inflation returns to 2%, but the timing and magnitude remain elusive given the strength of the economy and lingering uncertainty over the path of inflation,” said Tim Duy, chief U.S. economist at SGH Macro Advisors.

Read: What investors stashing $6.5 trillion away in cash should do as Fed pushes back on rate-cut expectations

Companies in focus

Diamondback Energy Inc.
FANG,
+10.17%

and closely held Endeavor Energy Resources LP on Monday confirmed reports they’re combining in a deal valued at about $26 billion including debt, marking the latest big oil merger. Diamondback shares were up 10%.

Shares of Big Lots Inc.
BIG,
-30.88%

plunged 27% after Loop Capital warned investors away from the discount home-essentials retailer, citing a “precarious” financial situation and loss of relevance with consumers.

Shares of AbbVie Inc.
ABBV,
-0.46%

fell 1% after the biotech lowered its first-quarter guidance to reflect the dilutive impact of its closure of the acquisition of ImmunoGen.

Rivian Automotive Inc. shares
RIVN,
-1.83%

were down 1.2%, near $16.50. A Barclays analyst downgraded the stock to equal weight from overweight in a Monday note to clients, while cutting his price target to $16 from $25 and warning that the electric-vehicle maker’s “leading technology” may not be enough to withstand a challenging environment.

Don’t miss: Recession fears evaporate in new forecast of top economists

Tesla Stock Is Slipping. Super Bowl Ads Slammed Driver-Assistance Software.

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