The Dow Jones Industrial Average and the S&P 500 ended lower on Monday, pulling back from record highs reached on Friday and breaking a six-week streak of gains. The declines were driven by rising Treasury yields and investor caution regarding elevated market valuations ahead of a busy earnings week for major companies.
“It’s not unusual for the market to take a breather after six weeks of consecutive record highs,” said Carol Schleif, chief investment officer at BMO Family Office.
The Dow fell 344.31 points, or 0.80%, closing at 42,931.60, while the S&P 500 lost 10.69 points, or 0.18%, finishing at 5,853.98. In contrast, the Nasdaq Composite gained 50.45 points, or 0.27%, to end at 18,540.01, bolstered by a 4.14% increase in Nvidia’s stock, which closed at a record high of $143.71.
The yield on the benchmark 10-year Treasury note surged to 4.17%, reaching a 12-week high. “The rise in the 10-year yield is creating uncertainty, suggesting that the economy may be growing too quickly while employment remains robust,” explained Sam Stovall, chief investment strategist at CFRA Research. “This could lead the Federal Reserve to be slower in reducing interest rates.”
On Friday, the Dow and S&P 500 both closed at record highs, marking a sixth consecutive week of gains—their longest winning streak of the year. However, many interest-rate-sensitive technology stocks retreated on Monday, with Tesla experiencing a 0.84% drop.
With 114 S&P 500 companies set to report earnings this week, including prominent names like Tesla, Coca-Cola, and Texas Instruments, investors appear to be taking profits ahead of the announcements. “The market is closely examining how stretched valuations are,” noted David Laut, chief investment officer at Abound Financial.
So far, approximately 83.1% of the companies that have reported earnings exceeded estimates, according to data compiled by LSEG.
Monday’s declines were widespread, with nearly all 11 major sectors of the S&P 500 closing in negative territory. The real estate sector, sensitive to interest rate fluctuations, fell 2.08% due to rising yields, while the technology sector saw gains thanks to Nvidia’s performance.
The small-cap Russell 2000 index, which is often viewed as a barometer for the economy, declined by 1.61%.
Additionally, investors are keeping an eye on the upcoming U.S. presidential election, with polls indicating a potential increase in support for former President Donald Trump, the Republican candidate.
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