Market Overview

By Lisa Pauline Mattackal, Purvi Agarwal and Carolina Mandl

(Reuters) – The Dow Jones Industrial Average and S&P 500 closed lower on Monday, retreating from Friday's record high closes and six consecutive weekly gains as Treasury yields rose and investors wary of high valuations awaited earnings from major companies.

"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.

Market Performance

• Dow Jones Industrial Average: Fell 344.31 points, or 0.80%, to 42,931.60
• S&P 500: Lost 10.69 points, or 0.18%, to 5,853.98
• Nasdaq Composite: Gained 50.45 points, or 0.27%, to 18,540.01, boosted by Nvidia, which rose 4.14% to close at a record high of $143.71.

Treasury Yields

The yield on the benchmark 10-year Treasury jumped as high as 4.17%, a 12-week high. "The rise in the 10-year yield is causing confusion that maybe the economy is growing too rapidly and that employment remains too resilient," said Sam Stovall, chief investment strategist at CFRA Research. "As a result, the Fed might end up being slower to lower interest rates."

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

Earnings Season

Many rate-sensitive megacap technology stocks slipped, with Tesla down 0.84%. After a fairly upbeat start to earnings season, the focus was on the 114 S&P 500 companies scheduled to report this week, including Tesla, Coca-Cola, and Texas Instruments. Analysts noted that ahead of a busy week for earnings, some investors likely took profits, with the market assessing how stretched valuations are.

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

Sector Performance

Monday's declines were broad, with nearly all 11 major S&P 500 sectors in the red:
– The rate-sensitive Real Estate sector dropped 2.08% as yields rose.
– The technology sector was lifted by Nvidia.
– The economically sensitive small-cap Russell 2000 dropped 1.61%.

Political Climate

Investors also looked ahead to the U.S. presidential election, with polls indicating improving chances for former President Donald Trump, the Republican candidate. "As the election date approaches, even small changes in tight polls could drive seemingly erratic swings in market sentiment," Danske Bank analysts said.

Notable Stock Movements

• Boeing: Jumped 3.1% after news that workers could vote on a new deal to end a costly five-week strike.
• Spirit Airlines: Skyrocketed 53.06% after reaching an agreement to extend a debt refinancing deadline by two months.
• Humana: Slipped 2.46% after a report that Cigna had resumed merger talks with the health insurer, with Cigna's shares also falling 4.69%.

Economic Reports

Upcoming economic reports include home sales, flash PMI, and durable goods data, as well as the Fed's Beige Book. Declining issues outnumbered advancers by a 3.51-to-1 ratio on the NYSE, with 262 new highs and 47 new lows recorded.

The S&P 500 posted 42 new 52-week highs and two new lows, while the Nasdaq Composite recorded 89 new highs and 51 new lows. Volume on U.S. exchanges reached 11.35 billion shares, compared to the 11.59 billion average for the full session over the last 20 trading days.