By Carolina Mandl and Bansari Mayur Kamdar
(Reuters) – The Dow Jones Industrial Average climbed on Monday and notched its longest winning streak in six years as investors bet on sectors beyond technology in a week filled with earnings reports and a Federal Reserve meeting.
“What you’re seeing now is people broadening the breadth of the market,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.
“People are starting to maybe take some profits (in tech) and invest in other parts of the markets that they might see a little bit better bargain.”
Investors are awaiting Microsoft, Google-owner Alphabet and Meta Platforms earnings this week, which will show whether their stocks justify sky-high valuations.
The tech-heavy Nasdaq Composite Index has rallied this year, outperforming its peers as rate-sensitive megacap growth companies rose on optimism about artificial intelligence and an end to the Fed’s tightening cycle.
The Nasdaq lost steam during the session as investors looked to non-tech stocks for bargains, lifting sectors from energy to banks.
Barclays’ head of U.S. equity strategy Venu Krishna said in a note to clients that investors are differentiating between tech companies. A few Big Tech names are driving all of the earnings upside, while the outlook for the “Rest of the Tech” is deteriorating, he said.
Helping the Dow notch its longest winning streak since February 2017, Chevron gained as the oil giant posted upbeat preliminary quarterly earnings over the weekend.
As of Friday, second-quarter earnings are expected to decline by 7.9%, according to Refinitiv data.
Investors ignored a survey showing July U.S. business activity had slowed to a five-month low, dragged down by decelerating service-sector growth.
“You’ve got an increasing belief that soft landing and an increasingly dovish Fed may occur,” said Carol Schleif, chief investment officer with the BMO Family Office, adding some sideline cash is coming back to stocks.
The Fed is expected to raise interest rates by 25 basis points at its policy-making meeting on Wednesday.
A majority of economists polled by Reuters expect this to be the last hike of the current tightening cycle, after data this month showed signs of disinflation.
According to preliminary data, the S&P 500 gained 18.72 points, or 0.41%, to end at 4,555.06 points, while the Nasdaq Composite gained 26.06 points, or 0.19%, to 14,058.87. The Dow Jones Industrial Average rose 187.11 points, or 0.53%, to 35,414.80.
Most of the 11 major S&P 500 sectors rose, led by a gain in energy stocks.
Toymaker Mattel rose as the “Barbie” movie set a record as the biggest domestic debut of 2023.
AMC Entertainment jumped after a judge blocked the theater chain’s stock conversion plan that risked diluting investors’ holdings in the company. AMC’s preferred shares fell.
U.S.-listed shares of Chinese companies like Alibaba and JD.com rose as its top leaders announced economic policy adjustments to expand domestic demand.
Exchange operator Nasdaq trimmed the weight of a handful of companies that make up close to half of the Nasdaq 100 to address “over-concentration” in the benchmark.
(Reporting by Carolina Mandl, in New York, Bansari Mayur Kamdar and Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva and Richard Chang)
