U. S. stocks ticked up Monday, helped by a sharp fall in oil prices. Investors are eyeing earnings reports and midterm elections this week. The S&P 500 and Nasdaq Composite each gained 0.3%. The Dow Jones Industrial Average jumped 469 points, or 0.9%.
Oil plummeted, with Brent crude dropping over 7% to around $104 per barrel. U. S. West Texas Intermediate futures also fell more than 7% to about $96. This drop came amid hopes that the U. S. and Iran may resume peace talks. Iranian state media reported that the country's foreign minister said an agreement is possible if the U. S. demonstrates goodwill.
Investors turned to cyclical sectors, with consumer discretionary stocks leading the advance, rising 3%. Financials and industrials gained over 1%, while materials increased 2%. Technology stocks struggled. Marvell Technology shares tumbled 10%, and Lumentum fell 15% after the companies announced that Marvell is buying Lumentum in a deal. Meanwhile, Oracle shares declined 6% as the company plans to raise $10 billion.
The stock market's long-term bullish outlook stays intact, said E-Trade's managing director of trading and investing. Short-term momentum has been disrupted by rising oil prices, concerns about AI spending, inflation, and geopolitical tensions. Last week, the tech-heavy Nasdaq and the S&P 500 posted losses for October. The Dow, however, rose nearly 2% as investors moved to defensive sectors like healthcare.
Tuesday's U. S. midterm elections could see Democrats taking the House of Representatives, while Senate control remains uncertain. A monthly jobs report and earnings releases are also due this week. Companies like Apple, McDonald's, and Qualcomm will report their earnings.
Loop Capital has downgraded Reddit from buy to hold, citing AI's impact on traditional internet searches affecting referral traffic. The investment bank also raised concerns about mandatory log-ins, monetization trends, and the future of Google's licensing deal with Reddit. Google's recent report of a significant drop in core advertising revenues led to its largest single-day stock decline on Thursday.
Construction Spending and Tech Sector Developments
Construction spending in September fell at its fastest monthly rate since the Covid pandemic began, driven by a sharp drop in residential activity. The Commerce Department reported a 1.9% decrease for the month, the largest monthly drop since April 2020. Year-over-year, construction spending fell 2.7%, with residential spending down 5.5%, overshadowing a 0.6% increase in nonresidential spending.
In the tech sector, Deutsche Bank has upgraded its rating back to overweight after previously downgrading it to neutral earlier this month. Analyst Parag Thatte noted that the sector's relative performance is at the bottom of its long-run trend channel, a level from which it has rebounded five times in the last 2.5 years. The Nasdaq-100 has slid roughly 8% since the downgrade on October 9, but analysts now see the trend reversing, with potential positive effects for the broader market.
The Institute for Supply Management reported that U. S. factory activity picked up in October, with the manufacturing index rising to 55.5, beating the 54.5 consensus estimate. The index measures the percentage of companies reporting growth, and within the survey, the prices index slipped while inventories and production increased.
PhillipCapital upgraded Amazon's stock to buy, raising its price target to $330, implying a 37% upside. The firm believes Amazon's extensive AI capabilities position it well for long-term success, despite recent negative free cash flow and capital expenditure pressures. Analyst Helena Wang emphasized that strong demand visibility supports sustained infrastructure investment, which will benefit Amazon over time.
