Dow, S&P 500 drop ahead of earnings; investors cautious after 6 weekly gains

By Lisa Pauline Mattackal, Purvi Agarwal and Carolina Mandl

(Reuters) -The Dow Jones Industrial Average and S&P 500 fell on Monday, as investors awaited earnings from major companies to gauge whether equities will sustain the recent rally that has brought six straight weekly gains.

"It's not at all unusual for the market to want to take a little bit of a breather after six weeks of continually record highs," said Carol Schleif, chief investment officer at BMO Family Office.

At 02:15 p.m. the Dow Jones Industrial Average fell 368.73 points, or 0.85%, to 42,907.18, the S&P 500 lost 17.04 points, or 0.29%, to 5,847.63 and the Nasdaq Composite gained 11.04 points, or 0.06%, to 18,500.59.

A jump in Treasury yields added pressure, with the yield on the benchmark 10-year bond rising as high as 4.17%, a 12-week high.

"Rates are going up because there is a thought that maybe the Federal Reserve won't cut two times before the year's over. You see economic data coming in a little bit stronger than anticipated," said David Laut, chief investment officer at Abound Financial.

Most rate-sensitive megacap technology stocks slipped, with Tesla (NASDAQ:TSLA ) down 1.3%, and Microsoft (NASDAQ:MSFT ) and Meta Platforms (NASDAQ:META ) both losing 0.4%.

After a fairly upbeat start to earnings season, the focus is on the 114 S&P 500 companies scheduled to report this week. These include Tesla, Coca-Cola (NYSE:KO ) and Texas Instruments (NASDAQ:TXN ).

Of companies that have reported so far, 83.1% beat earnings estimates, according to data compiled by LSEG on Friday.

Some traders were likely booking profits, Tim Ghriskey, senior portfolio strategist with Ingalls & Snyder, said.

On Friday, the Dow and the S&P 500 both closed at record highs as all three major indexes closed out a sixth consecutive week of gains, their longest winning streak this year.

Monday's declines were broad, with almost all 11 major S&P 500 sectors in the red, except for Information Technology.

The rate-sensitive Real Estate sector dropped 1.77% as yields rose, while the technology sector was lifted by a 3% jump in chip heavyweight Nvidia (NASDAQ:NVDA ), which briefly touched a fresh record high.

The economically sensitive small-cap Russell 2000 dropped 1.4%.

Investors also looked ahead to the upcoming U.S. presidential election, with polls showing the chances improving for former President Donald Trump, the Republican candidate. [MKTS/GLOB]

"As the election date approaches, even small changes in tight polls could drive seemingly erratic swings in market sentiment," Danske Bank analysts said.

Meanwhile, Boeing (NYSE:BA ) jumped 3.2% after news that workers could vote on a new deal to end a costly five-week strike.

Spirit Airlines (NYSE:SAVE ) skyrocketed 51.7% after the company reached an agreement to extend a debt refinancing deadline by two months.

Humana (NYSE:HUM ) slipped 1.82% after a report said Cigna (NYSE:CI ) had resumed merger talks with the health insurer. Cigna's shares lost 4.32%.

Home sales, flash PMI and durable goods reports are on the data docket through the week, as is the Fed's Beige Book.



Declining issues outnumbered advancers by a 3.83-to-1 ratio on the NYSE. There were 226 new highs and 39 new lows on the NYSE.

The S&P 500 posted 41 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 82 new highs and 41 new lows.

Source: Investing.com