Dow rises more than 400 points as Wall Street tries to add to last week’s rally

The three major indexes ended the trading day up, continuing to gain steam coming off a strong day Friday.

The Dow added 417 points, which translates to 1.3%.

The S&P 500 gained 1.2%, while the Nasdaq ended up 0.9%.

— Alex Harring

As earnings season kicks into full gear, investors will be weighing companies’ results and guidance in an attempt to predict future performance.

Earnings can move a company’s stock in the short term. Meanwhile, guidance is used by investors to forecast performance in future quarters.

Here’s what experts told CNBC to know about corporate earnings.

— Greg Iacurci, Alex Harring

Third-quarter GDP is expected to show mild economic growth in the U.S., putting on hold some of the debates about whether there is currently a recession.

However, some industries like housing clearly are in major downturns, in a way that seems to have been predicted by the equity market, according to Liz Ann Sonders, chief investment strategist at Charles Schwab.

“The market to some degree last year in 2021 telegraphed what’s happening in the economy this year,” Sonders said, pointing to solid gains by the headline indexes even as many individual stocks saw big declines throughout the year.

The indexes have “caught down” this year, Sonders said, with all three major averages in bear market territory.

That could mean that the market has now priced in a full recession, but uncertainty around inflation and interest rates might break the pattern, Sonders said.

“In the short-term, the market has become very reactionary. And that has a lot to do with the Fed,” Sonders said.

— Jesse Pound

Inflation was top of mind among executives speaking during earnings call in the past two weeks.

About two-thirds of companies in the S&P 500 that reported during the period had discussed the topic during their calls, according to an analysis of FactSet transcripts.

Executives largely agreed that inflation was hurting their companies. But they varied on when it would recede, with some saying it already has and others forecasting the second half of 2023.

“The environment clearly is still very inflationary with a lot of supply chain challenges across the industry,” said Ramon Laguarta, chief executive of PepsiCo.

Read more about what executives had to say about inflation here.

— Alex Harring

Wall Street’s top strategist Marko Kolanovic believes the sell-off in Chinese stocks is disconnected from fundamentals, presenting a buying opportunity.

“China growth data surprised positively over the weekend, but their equity market is selling off strongly today,” JPMorgan’s Kolanovic, the bank’s chief global markets strategist, said in a Monday afternoon note.

“We believe this is a good opportunity to add given an expected growth recovery, gradual COVID reopening, and monetary and fiscal stimulus. 3Q and 4Q earnings should confirm fundamentals remain anchored in resilient labor markets and COVID reopening,” Kolanovic said.

The Invesco Golden Dragon China ETF, which tracks the Nasdaq Goldman Dragon China Index, plunged 20% at its lowest level Monday after Beijing tightened President Xi Jinping’s grip on power, souring investor sentiment for non-state-driven companies.

— Yun Li

Twenty one stocks in the S&P 500 set new 52-week highs inside the first hour of trading Monday, and 81% of those (17 of 21) touched all-time highs. (One all-time high, Merck, and one 52-week high, Amgen, are also in the Dow):

The new SPX highs were:

• AutoZone: Trading at all-time high levels going back to its 1991 IPO
• Genuine Parts Company: All-time high going back to its 1948 IPO
• O’Reilly Auto: All-time high back to 1993 IPO
• ConocoPhillips: All-time high back to the merger between Conoco and Phillips Petroleum in 2002
• Hess: All-time high back to merger with Cletrac and public listing on NYSE in 1962
• SLB: Highest since Nov. 2018
• Exxon: All-time high going back to when it was listed on NYSE in 1920
• Globe Life: All-time high since Torchmark Corp. was initially formed in 1980
• Principal Financial: All-time high since 2001 IPO
• W.R. Berkley: All-time high since it went public in early 1970’s
• Amgen: Highest since May, 2021
• Cardinal Health: Highest since Jan. 2018
• Cigna: All-time high going back to 1972 IPO
• Humana: All-time high going back IPO as Extendicare in 1968 (renamed Humana in 1974)
• Eli Lilly: All-time going back to 1952 when offered first public shares 
• McKesson: All-time high back through CNBC history to 1983
• Molina Healthcare: All-time high back to 2003 IPO
• Merck: All-time high back through CNBC history to 1978
• Vertex Pharma: All-time high back to 1991 IPO
• Huntington Ingalls: Highest since Feb. 2020
• Northrop Grumman: All-time high going back to merger between Northrop Aircraft and Grumman Aerospace in 1994

Four stocks in the S&P 500 marked new 52-week lows early Monday. None were record lows:

• CarMax: Traded at lows not seen since April 2020
• Tesla: Lowest since June 2021
• Estee Lauder: Lowest since August 2020
• Crown Castle: Lowest since March 2020

— Scott Schnipper, Christopher Hayes

Evercore ISI’s Mark Mahaney says Amazon’s third-quarter estimates are likely beatable, but downside risks loom in the fourth quarter as the e-commerce giant grapples with foreign exchange headwinds.

“Based on intra-quarter data points and our model sensitivity analysis, we believe AMZN’s Q3 estimates are largely reasonable,” Mahaney said in a note to clients Sunday. “As it relates to Q4, we view the Street’s Revenue growth assumption (22% Q/Q) as having some downside risk (primarily due to rising FX headwinds), and we see some downside risk to the Street’s Q4 Operating Income estimate.”

Evercore’s estimates for fourth-quarter revenue and operating income currently sit 1% and 10% below Wall Street consensus estimates, respectively.

Meanwhile, the firm’s third-quarter revenue expectations fall in line with consensus while estimates for operating income remain slightly above the Street and at the upper end of Amazon’s guidance. The technology giant has notched above the high end of its guidance in 19 of the last 26 quarters and three of the last six.

Despite mounting fears of a recession and worries of a pullback in marketing spending, Evercore ISI believes companies will continue to spend on cloud computing which should benefit Amazon’s AWS segment.

“We also point to healthy backlog growth for AWS as of Q2:22 (65% Y/Y) as a reasonable reference point for ongoing Cloud computing strength and the segment’s resilience to recession,” Mahaney wrote.

The technology giant is set to report results after the bell Thursday.

— Samantha Subin

These companies are making headlines midday:

• Avis Budget Group: Shares jumped more than 13% after the stock was upgraded by JPMorgan to overweight from neutral. Analysts believe car rental prices will remain elevated longer than investors believe.
• Alibaba, Pinduoduo — Shares of Chinese companies listed in the U.S. dropped after Beijing tightened President Xi Jinping’s grip on power, souring investor sentiment for non-state-driven companies. Alibaba lost 15%, while Pinduoduo plunged more than 26%.
• Starbucks — Starbucks dropped more than 6% in midday trading. The company also has exposure to China, opening its 6,000th store in the country last month.

Check out more midday movers here.

— Michelle Fox

Apple is set up for a potential post-earnings bounce, according to Deutsche Bank.

Analyst Sidney Ho said in a note on Sunday evening that Apple’s upcoming earnings report may not feature a large beat but the “risk-reward profile is attractive” because of low expectations among investors.

“We do think the slower growth is already anticipated by the market, especially given recent media reports suggesting AAPL is cutting iPhone orders and that the stock has pulled back ~20% from its August peak. We also believe the company’s strong balance sheet will shine in the current environment, supporting its dividend payments and share repurchases totaling $100b+ annually,” Ho wrote.

Apple is set to report its fiscal fourth quarter results on Thursday after the bell. The stock was up less than 1% in midday trading.

— Jesse Pound, Michael Bloom

The Nasdaq composite is trading up midday after hitting declines of more than 1% earlier in the day.

Hits to tech stocks originally weighed on the composite. Meta was down more than 3.1% after Bank of America downgraded the stock to neutral from buy over concerns of declining advertising spending. It was last trading up 2.4%.

But not every stock had the same rebound. Chinese tech companies listed in the U.S. such as Alibaba and Baidu remained down double digits after political changes bettered President Xi Jinping’s positioning, which in turn worried investors who fear the impacts on private firms.

The index last added around 0.4%. At its intraday high, the index was up about 0.7% from where it last closed.

There were issues in the agriculture space before the coronavirus pandemic hit in 2020. The industry was dealing with a number of headwinds, from hurricanes and poor planning disrupting crop growth cycles to the impact of retaliatory tariffs slashing exports.

Then, pandemic highlighted existing issues and brought new ones, including supply and demand shocks to the food system and a labor shortage. The invasion of Ukraine dealt another blow, roiling global grain markets.

These issues have highlighted an immense need for investment in agriculture and specifically technology to improve the efficiency of the industry. As more money has poured in to venture capital in the space, there are a few ways retail investors can play the trend.

“There’s a lot of attraction to this space and increasingly so since the beginning of the pandemic, you had a series of events that put a focus on food security,” said Kristen Owen, executive director and senior analyst covering sustainable growth and resource optimization at Oppenheimer.

Read more on CNBC Pro.

—Carmen Reinicke

Commodities could be the next pandemic winner to start sliding, according to Wolfe Research.

“If bonds are the sober adult at the party, and equities are the one taking tequila shots, is it last call for commodities?,” analyst Rob Ginsberg said in a note to clients last week. “After a solid two-year bull run, commodities now sit on crucial support.”

Ginsberg pointed to the Bloomberg Commodity Index starting to trend downward relative to the S&P 500 after shooting up since the start of 2022 through summer.

He pointed to commodities such as oil, aluminum, corn and cotton starting to inch down, while highlighting coffee is at its deepest oversold reading since the pandemic began. Ginsberg noted soft red wheat is one commodity showing strength in the bear market.

Among precious metals, Ginsberg said platinum had a “fake breakout” and that calling gold’s performance disappointing “would be an understatement.”

— Alex Harring

Apple will have an extra week to contend with in the first quarter of 2023, but it might not help or hurt the technology giant much, according to Bank of America.

“F1Q23 will be a 14 week quarter with the extra week falling in the week from Christmas to New Year,” wrote Wamsi Mohan in a Monday note. “Historically mgmt. has noted that the extra week in that time period has (1) been a good week of sell through, (2) commensurately increases variable expenses, (3) benefits from an extra week of fixed cost absorption (tailwind to gross margins).”

Looking ahead to that quarter, Mohan’s focus will be on the trajectory of demand, not counting the extra week, as that will determine what happens in March and June quarters, which is where they see the most risk to estimates.

“An inline Dec guide would imply a weaker cycle overall,” said Mohan. Bank of America maintained its neutral rating on Apple and in particular the risk versus reward balance where lower consumer spending, weaker services trajectory and headwinds from a stronger dollar are offset by a better mix of iPhones, potential new products and fresh services advertising.

—Carmen Reinicke

Chinese large-cap stocks fell as Jinping cemented his control over the country’s Communist Party, inciting fear among investors of trouble ahead for private firms. Under his leadership, China has also previously implemented a slew of policies tightening regulations for the technology sector.

Meanwhile, China on Monday released previously delayed gross domestic product data for the third quarter, which showed GDP grow 3.9% year over year. Analysts polled by Reuters prior to Oct. 18 had expected China to report GDP growth of 3.4% for the third quarter.

The KraneShares CSI China Internet ETF (KWEB) was last down nearly 20% and on track for its worst day since its inception in July 2013.

— Samantha Subin, Gina Francolla

The strength of the U.S. dollar against China’s Renminbi is not a cause for panic but is a concern, according to Seema Shah, chief global strategist at Principal Asset Management.

The dollar has surged against other currencies as the Federal Reserve hikes interest rates to cool hot inflation.

“With the People’s Bank of China (PBoC) trying to keep monetary policy loose, the yield differential between the U.S. and China has turned firmly in favor of the greenback,” Shah said in a Monday note. “China’s continued restrictive COVID policy has also significantly hurt confidence, further reducing the relative attractiveness of the renminbi—contributing to a 6% depreciation against the U.S. dollar in just the last three months, and also prompting capital outflows.”

Still, though the situation is concerning, it is not dire or a cause for panic.

“The renminbi has held steady against the currencies of China’s major export rivals, and trade flows have remained strong, partially offsetting capital outflows. Policymakers are also deploying measures aimed at limiting further RMB depreciation,” said Shah. “Increasing onshore foreign currency liquidity, and curbing currency speculation via increases to the risk reserve ratio, jointly suggest a disorderly depreciation of the RMB is unlikely.”

Because of this, the People’s Bank of China should be able to contend with currency weakness until the U.S. dollar peaks – likely when the Fed policy rates hit their highs next year.

“Nonetheless, challenges could still emerge next year if shrinking global demand results in slowing export growth, renewing downward pressure on the renminbi,” she added. “A storm cloud be forming on the horizon.”

—Carmen Reinicke

The 10-year Treasury yield was at about 4.25% Monday, after weaker U.S. PMI data and as the next leader of the U.K. government became more clear.

The benchmark yield touched a 14-year high of 4.33% Friday before retreating sharply to the 4.20% area. That yield is key since it impacts mortgages and is widely watched by stock investors. Yields move opposite price.

The yield touched an overnight low Monday just below 4.13% overnight but was as high as 4.26% in morning trading. The yield dipped initially but was back at 4.25%, after both S&P Global manufacturing and services PMIs were weaker than expected.

The flash reading of manufacturing PMI was at 49.9. Below a reading of 50 shows contraction, and the consensus was 51.8, according to Dow Jones. Services PMI was at 46.6, while the Dow Jones consensus was at 49.7.

Strategists said the yield seems to have reached a near-term high on Friday.

“It’s rocketed up over the last couple of weeks,” said Wells Fargo’s Michael Schumacher. “We thought it was overdone. I think that it’s [put in] a near-term peak is about right.”

He said the fact that Britain is moving ahead with a new prime minister has helped calm the market somewhat. Rishi Sunak is set to replace Liz Truss, who resigned last week.

Schumacher said the 10-year yield could run higher again before the end of the year, as investors price in a terminal rate for the fed funds rate. Traders in the futures market are now betting the fed funds rate reaches about 4.90%, down from just over 5% Friday. The terminal rate is the rate where Federal Reserve officials stop raising interest rates.

Schumacher said it would not be surprising if the 10-year reaches 5% later this year.

–Patti Domm

Stifel’s chief equity strategist Barry Bannister says the S&P 500 could rally as much as 15% over the next six months and hit 4,300 by April 2023.

The setup requires a peak in inflation and the Federal Reserve’s hawkishness, which the firm believes have likely already occurred.

Bannister also provided insight into the firm’s outlook for the benchmark index through 2031, noting that commodities and the commodity index play an integral role in where the S&P goes from here.

CNBC Pro subscribers can read more on Stifel’s S&P call here.

— Samantha Subin

Mohamed El-Erian, Allianz and Gramercy advisor, said the Federal Reserve is dealing with a “trilemma” — growth, inflation and financial stability, and it could be forced to slow down tightening for financial stability concerns.

“Inflation hasn’t turned around. Core CPI continues to go up. This is because of financial stability. This massive front-loading of rate hikes will break something in the financial markets,” EL-Erian said. “So if the Fed does slow, it is because we have financial stability concerns.”

The widely watched strategist said this market rally is driven by liquidity rather than fundamentals, and it has overshot.

— Yun Li

The major indexes moved after market open Monday as investors looked to add to gains seen last week.

The Dow added more than 250 points, or 0.8%. The S&P 500 was up 0.4%.

The Nasdaq seesawed between gains and losses as Chinese technology stocks weighed on the composite.

— Alex Harring

— Scott Schnipper, Gina Francolla

Treasury yields pulled back coming off Friday highs.

The yield on the 10-year Treasury yield was down by multiple basis points to 4.183%. That marks a turn from Friday, when it hit a 14-year high at 4.337% before the Wall Street Journal reported that some Federal Reserve officials were growing concerned about raising interest rates too far.

The policy-sensitive 2-year Treasury yield was also down by less than a basis point to 4.487% after hitting a high also not seen since the late 2000s.

Monday data on flash manufacturing and purchasing management could provide a jolt.

Yields and prices move in opposite directions. One basis point equals 0.01%.

— Alex Harring, Sophie Kiderlin

Until the Federal Reserve changes its messaging, ie pivots, this latest little stock market boomlet is unsustainable, in the eyes of Canaccord Genuity chief market strategist Tony Dwyer.

The success of the rally “ultimately depends on rates,” money supply and the relative tightness of financial conditions, Dwyer wrote in Monday note to clients. Unfortunately for bulls, the two-year Treasury yield made a new high last week, meaning that the recent low in the S&P 500 is probably not the ultimate bottom.

— Scott Schnipper

Analysts from UBS and Wells Fargo are bullish on Walt Disney ahead of the company’s fiscal fourth-quarter earnings, expected on Nov. 8.

Little has changed for Disney since it reported an earnings beat for third quarter, other than the stock price, noted Wells Fargo analyst Steven Cahall. Shares have lost more than 5% since it last reported on August 10 and are down 34% year to date.

Cahall remains confident Disney can deliver sequential growth in Disney+ net core adds, reach breakeven in direct-to-consumer and start to see a significant inflection in free cash flow as content spend normalizes and working capital unwinds, he wrote in a note Friday.

“DIS’s scale, strategy, and assets continue to make it our favorite name in Media,” Cahall said.

UBS expects Disney’s upcoming report to show continued strength in parks, sequentially better direct-to-consumer subscriptions and a choppy advertising environment. The firm expects Disney’s total revenues to grow 13% year over year and 35% growth in earnings before interest and taxes.

— Michelle Fox

These are the stocks making the biggest moves in pre-market trading:

• Tesla: The electric vehicle maker shed 2.5% after cutting Model 3 and Model Y prices in China by up to 9%. Chinese electric vehicle makers’ shares notched down in response.
• Alibaba: The e-commerce company dropped 12.3% in response to weaker-than-expected data on Chinese GDP.
• ServiceNow: ServiceNow added 2.5% after Guggenheim upgraded the stock to “buy” from “neutral,” citing its profit margin and dependable consumer base.

See the full list of movers here.

— Peter Schacknow, Alex Harring

JPMorgan president Daniel Pinto said the Fed is not out of line as it battles inflation through interest rates. And he said a recession as a result would be a necessary evil.

“When people say, `the Fed is too hawkish,′ I disagree,” Pinto said in an interview with CNBC. That sentiment is a break from a growing group of business and economic leaders who argue the Fed is not giving enough time for what they see as lagging indicators to reflect mitigating inflation.

“I think putting inflation back in a box is very important,” he added. “If it causes a slightly deeper recession for a period of time, that is the price we have to pay.”

Pinto predicted the Fed funds rate will likely peak around 5%. In the interview with CNBC, he recounted his experience growing up in Argentina, where food and gas prices were recalculated multiple times per day due to instability from inflation.

Read the full story here.

— Hugh Son, Alex Harring

Traders still strongly expect the Federal Reserve to raise its benchmark interest rate by 0.75 percentage point next week, but are now split on what happens in December.

There’s now just a 50-50 chance the Fed enacts yet another three-quarter point hike at the Dec. 13-14 meeting, down considerably from probabilities that were well above 70% in recent days, according to CME Group tracking data of fed funds futures.

That shift comes following a Wall Street Journal report last week that indicates some central bankers want to have a discussion at the Nov. 1-2 meeting on how aggressive they need to be going forward on the pace of rate hikes.

San Francisco Fed President Mary Daly, for instance, said Friday she thinks the central bank may need to do a “step down in terms of just the pace of increases.”

Though she still sees the fed funds rate rising to 4.5%-5% in 2023, Daly said the Fed may not have to be as aggressive in getting there. Daly added she’s not sure when the “step down” process will begin and stressed it will depend on economic data.

—Jeff Cox

Meta Platforms shares were downgraded to neutral from buy by Bank of America, with analyst Justin Post citing concerns over lower ad spending.

″[While] 4Q & 2023 expectations have been lowered, we expect advertiser budget cuts in early 2023 to weigh on sentiment and drive added uncertainty on post-IDFA changes and Reels transition,” Post wrote in a Monday note. 

Shares fell more than 1% in the premarket following the downgrade.

CNBC Pro subscribers can read the full story here.

— Sarah Min

Whether oil prices rise or fall, energy stocks are still worth investing in, according to Foord Asset Management’s Brian Arcese.

He names a couple of his favorite energy stocks, including one that he says will generate a “significant amount of cash” if oil prices stay high.

CNBC Pro subscribers can read more here.

— Weizhen Tan

China’s gross domestic product grew 3.9% in the third quarter from a year ago, data from the National Bureau of Statistics showed. Analysts polled by Reuters expected 3.4% growth.

The GDP report was due to be released during the Communist Party of China’s National Congress, but was delayed along with other data. The congress ended on Saturday.

In the second quarter, GDP increased 0.4% compared with the same period in 2021.

Retail sales missed Reuters’ average estimate, coming in at 2.5% for September from a year ago, while industrial output surprised to the upside at 6.3%, compared to the forecast of 4.5%.

— Abigail Ng

Goldman Sachs has identified four “critical” sectors in the clean energy market, beyond the usual suspects.

Dubbing them “greenablers,” Goldman says they are less appreciated by ESG investors but could be “in the framework of investors potentially looking beyond Solar/Wind/Water stocks.”

It names buy-rated stocks to play these four sectors.

CNBC Pro subscribers can read more here.

— Weizhen Tan

A slew of big tech names report third quarter earnings this week. Because of the size of many of these companies’ market capitalizations, any moves after earnings will likely impact the entire market.

Alphabet and Microsoft report earnings on Tuesday, followed by Meta Platforms on Wednesday. Apple and Amazon will report Friday.

—Carmen Reinicke

Snap shares looked poised to open the week lower, continuing Friday’s route after shedding more than 28%.

The move came after the company reported quarterly earnings. Even though the social media company posted an unexpected profit, it also missed revenue estimates, reporting $1.13 billion versus the $1.14 billion analysts expected, according to Refinitiv.

Shares were more than 1% lower on Sunday following the drop.

—Carmen Reinicke

Stock futures rose Sunday evening as Wall Street looks to continue its best week since June amid third quarter earnings season.

Futures tied to the Dow Jones Industrial Average gained 289 points, or 0.93%, just a few minutes after the start of futures trading Sunday. S&P 500 futures rose 1.18% while Nasdaq 100 futures climbed 1.37%.

—Carmen Reinicke