S&P 500, Dow hit new highs; Big Tech struggles ahead of earnings

(Reuters) – The S&P 500 hit a record high on Monday, led by Tesla and Paypal, while industrial bellwethers Caterpillar and 3M lifted the Dow to a new peak in the run-up to quarterly reports from big U.S. technology companies, whose shares struggled to gain.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 6, 2021. REUTERS/Brendan McDermid/File Photo

Caterpillar Inc and 3M Co rose 0.9% each ahead of their quarterly updates later this week.

Tesla Inc jumped 9.5% to a new peak after car rental firm Hertz placed an order for 100,000 Tesla cars, while Morgan Stanley raised its price target on the stock.

“Tesla has been a company which has mastered the art of delivering very positive publicity and the Hertz deal is one more addition to their hat,” said Rick Meckler, partner at Cherry Lane Investments in New Jersey.

“The only issue is if they can produce those huge number of vehicles as there is no shortage of demand.”

Tesla provided the biggest boost to the S&P 500 and the Nasdaq, followed by PayPal Inc, which added 4.1% after the payments company scrapped its plans to buy the digital pinboard site Pinterest Inc for as much as $45 billion. Shares of Pinterest fell 12.5%.

All the 11 major S&P sectors advanced, with energy and consumer discretionary shares rising the most. [O/R][MET/L]

However, shares of big U.S. tech companies struggled, with losses in Alphabet Inc, Amazon.com and Microsoft Corp.

Shares of Facebook Inc were marginally up ahead of its quarterly results after market close. Investors fear that like Snap Inc, the social media giant’s ad revenue too could face the brunt of Apple’s privacy changes.

Along with Facebook, Microsoft, Apple, Alphabet and Amazon.com Inc together account for more than 22% of the weightage on the benchmark index.

Strong earnings updates had helped the Dow and the S&P 500 rise more than 5.6% each so far in October after a stumble in September.

Analysts expect profit at S&P 500 companies to grow 34.8% year-on-year for the third quarter, according to Refinitiv data.

Investors are also assessing how companies are mitigating supply chain bottlenecks, labor shortages and inflationary pressures to sustain growth.

“Earnings remain good and have fueled a lot of gains in markets this year, but a few investors are worried about earnings peaking … and are trying to bounce between companies having pricing power to the ones that might struggle adding to some volatility in markets,” Meckler said.

Shares of Kimberley-Clark dropped 3.1% after the Huggies diapers maker cut its 2021 profit outlook due to higher input cost inflation.

At 12:37 p.m. ET, the Dow Jones Industrial Average was up 54.75 points, or 0.15%, at 35,731.77, the S&P 500 was up 21.28 points, or 0.47%, at 4,566.18, and the Nasdaq Composite was up 120.79 points, or 0.80%, at 15,210.99.

On the economic data front, readings on U.S. third-quarter GDP – the Federal Reserve’s favored inflation gauge, the core PCE price index and consumer confidence data will be released later this week.

Advancing issues outnumbered decliners by a 1.87-to-1 ratio on the NYSE and by a 1.50-to-1 ratio on the Nasdaq.

The S&P index recorded 74 new 52-week highs and two new lows, while the Nasdaq recorded 135 new highs and 75 new lows.

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