U.S. stocks were little changed on Monday, with major indexes trading near record levels as investors looked ahead to key quarterly results that will be released this week. Corporate quarterly results may help to shed light on whether current levels are justified by economic activity at American corporations.
The Dow Jones Industrial Average DJIA, -0.02% fell 16 points, or 0.1%, to 21,621, coming off an all-time closing high on Friday. The S&P 500 SPX, +0.03% which also ended at a record Friday, dipped 0.4 point to 2,459. The Nasdaq Composite Index COMP, +0.19% rose 4.5 points to 6,317, a gain of 0.1%.
Whether stocks can extend further into record territory hinges partly on the outcome for earnings, with investors looking for signs that valuations are justified by the strength of corporate results, particularly given doubts about Washington’s ability to deliver a roster of Wall Street-friendly legislations.
Some 68 S&P 500 companies will report this week, according to FactSet. Those include Bank of America Corp. BAC, -0.56% Goldman Sachs Group Inc. GS, -0.12% Microsoft Corp. MSFT, +0.16% and General Electric Co. GE, -0.07%
What will give stocks a push higher: While earnings are important, tax legislation remains the most important political issue for U.S. stocks, said Michael J. Wilson, equity strategist at Morgan Stanley, in a note to clients on Monday.
He said equity multiples must expand again for the S&P 500 to reach their 2017 target of 2,700, but the catalyst on that expansion would likely be “more policy ‘certainty’ rather than the outcome itself.
“No matter what gets passed in the next few months, we think just moving forward with a decision on the Affordable Care Act and taxes will provide the certainty necessary for companies and individuals to “act” on their higher confidence readings which have remained elevated,” said Wilson.
The latest economic data was cautious, with the New York Fed’s Empire State manufacturing index falling to a seasonally adjusted reading of 9.8 from 19.8 in June. Analysts were looking for a reading of 15.
Stocks to watch: Investment manager BlackRock Inc. BLK, -2.60% slipped 2.8% after reporting a profit and sales miss, despite massive inflows into its low-fee exchange-traded funds. Streaming giant Netflix Inc. NFLX, +1.04% is due to report its results after the close; the stock rose 1.3% in early trading. Read a Netflix preview here.
Other markets: In China, the Shanghai Composite Index COMP, +0.19% closed down 1.4%, but off earlier lows as data showed expansion in the world’s second-biggest economy beat forecasts with 6.9% second-quarter growth. Helping to spark the selling, Chinese officials at a financial conference hinted at tighter controls on the economy.
Oil prices CLQ7, +0.11% and gold futures GCQ7, +0.57% were slightly higher. The dollar DXY, +0.04% was slightly lower. Meanwhile, the benchmark 10-year Treasury note yield TMUBMUSD10Y, -0.69% was at 2.31%.