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Market Snapshot: Dow, S&P 500 eke out gains as investors await earnings and Wednesday’s Fed decision

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U.S. stocks finished mixed on Monday, after flipping between modest gains and losses, as investors contemplate a week stuffed with monster earnings and await a Federal Reserve policy meeting that’s expected to include another outsize rate hike.

Dow industrials and the S&P 500 finished higher for the fourth time out of the past five trading days, while the Nasdaq Composite ended lower.

How stocks traded

The Dow Jones Industrial Average
DJIA,
+0.28%

finished up by 90.75 points, or 0.3%, at 31,990.04.

The S&P 500
SPX,
+0.13%

closed up by 5.21 points, or 0.1%, at 3,966.84.

The Nasdaq Composite
COMP,
-0.43%

ended lower by 51.45 points, or 0.4%, at 11,782.67.

Last week, the Dow rose 2%, while the S&P 500 gained 2.6% and the Nasdaq Composite advanced 3.3%.

What drove markets

Traders generally held steady on Monday and appeared reluctant to build bold positions before a big batch of corporate earnings, which could shape market sentiment in the short term.

For the new week, there will be 175 S&P 500 companies reporting, including big beasts like Apple
AAPL,
-0.74%
,
Alphabet
GOOGL,
-0.36%
,
Microsoft
MSFT,
-0.59%

and Amazon
AMZN,
-1.05%
,
though the action doesn’t pick up again until Tuesday.

“Earnings optimism is overshadowing recession fears that dragged stocks lower on Friday,” said Fiona Cincotta, senior financial markets analyst at City Index.

The S&P 500 is down 16.8% for the year to date as of Monday, but has climbed back by 8.2% from the 52-week low it hit in mid-June, with sentiment underpinned of late by a corporate reporting season that has proved better than some had feared.

See: Bear-market bottom for U.S. stocks? What the pros say as S&P 500 tests 4,000

With 21% of S&P 500 companies having reported, the second quarter blended earnings growth rate for the benchmark index is 4.8%, according to John Butters, senior earnings analyst at FactSet.

“If 4.8% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q4 2020 (4.0%),” Butters said. However, “68% of S&P 500 companies have reported a positive EPS surprise and 65% of S&P 500 companies have reported a positive revenue surprise,” he added.

The market’s forward 12-month P/E ratio is 16.7, below the 10-year average of 17.0, according to FactSet, a pullback that is supporting valuations.

Earnings Watch: Here are 5 things we’ve learned since second-quarter earnings season kicked off

See also: Big Tech earnings are about to determine the direction of the market and These 20 stocks still have at least 48% upside, analysts say, despite the S&P 500’s 8% gain from its lows

The looming Federal Reserve rate decision on Wednesday provided another reason for caution. The central bank is expected to raise borrowing costs by 75 basis points to a range of 2.25% to 2.50%, but investors will be keen to hear about how the Fed sees the pace of future hikes.

“The pace of hikes remains uncertain as we get into the fall. If labor market data starts to soften we can expect the Fed’s attention to once again switch to its dual mandate. But if inflation remains stubbornly high, then the Fed may continue to hike even if a recession is imminent,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

“This uncertainty is likely to keep volatility elevated. The stock market is likely to remain range bound until the Fed pivots, or we get a reacceleration in business activity,” Marcelli wrote in a note.

Read: Will the Federal Reserve snuff out a stock-market bounce? What investors will be watching.

Companies in focus

Around 2,500 Boeing Co.
BA,
-0.96%

workers were expected to go on strike Aug. 1 at three plants in the St. Louis area after they voted to reject a contract offer from the plane maker. Boeing shares finished down by 1%.

Newmont Corp.
NEM,
-13.23%

shares ended down by 13.2% after the gold miner reported second-quarter profit that fell well short of expectations.

Shares of Weber Inc.
WEBR,
-12.65%

finished lower by 12.7% after the grill maker issued a sales warning for its third quarter and announced the departure of its chief executive, Chris Scherzinger.

Tesla Inc.
TSLA,
-1.40%

disclosed in its latest 10-Q filing Monday that it received a second subpoena from the Securities and Exchange Commission asking the company to provide information on its “governance processes around compliance with the SEC settlement” related to Chief Executive Elon Musk’s 2018 tweet about taking the company private at $420 a share. Tesla shares ended down by 1.5%.

See: Elon Musk denies alleged affair with Google co-founder Sergey Brin’s wife as ‘total bs’

How other assets fared

The 10-year Treasury yield BX:TMUBMUSD10Y rose 3.8 basis points to 2.819%, the largest one-day gain in almost a week. Yields and debt prices move opposite each other.

The ICE U.S. Dollar index DXY fell 0.3%.

U.S. oil futures gained, with September WTI oil gaining $2, or 2.1%, to settle at $96.70 a barrel on the New York Mercantile Exchange.

August gold settled at $1,719.10 an ounce, down $8.30, or 0.5%.

Bitcoin BTCUSD dropped 2.8% to trade near $22,122.

Hong Kong’s Hang Seng
HSI,
-0.22%

ended 0.2% lower, while the Shanghai Composite
SHCOMP,
-0.60%

shed 0.6% and Japan’s Nikkei 225
NIK,
-0.77%

ended with a drop of 0.8%. In Europe, the Stoxx 600
SXXP,
+0.13%

finished 0.1% higher, while London’s FTSE 100
UKX,
+0.41%

ended up by 0.4%.

— Jamie Chisholm contributed to this article.

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