Wall Street mood has become circumspect as traders gear up to receive a slew of earnings reports this week amid the market’s record run. The Nasdaq Composite has been a laggard among the major averages and it remains to be seen if the early sentiment reverses and tech stocks could finish the session with a flourish.

A spate of earnings due ahead of the market may set the tone for the day’s trading. Traders may also focus on any potential preannouncements, the results of a regional manufacturing survey and a couple of speeches by Federal Reserve officials. Energy stocks could lose their verve amid the sharp retreat in energy prices amid waning demand and supply concerns. Bond yields continue to hold firm.

Cues From Last Session:

As a result, the Dow and S&P 500 set fresh closing and intraday highs, with the former topping 43,000 for the first time ever. The Nasdaq Composite is just under seven points from its all-time high of 18,509.34.

All but one of the S&P 500 sector indices closed higher for the day, with energy stocks notching a marginal loss. IT and utility stocks were the biggest gainers of the session, led by Nvidia Corp. (NASDAQ:NVDA). The artificial intelligence stalwart ended the session at a record high.

Insights From Analysts:

Cyclical stocks are poised for relative outperformance, thanks to the recent data that reinforces the resilience of the economy, according to Morgan Stanley analysts. But positioning in cyclicals remains light, said the firm’s Chief U.S. Equity Strategist Mike Wilson.

“This creates opportunity in a sector that we upgraded to overweight last week given rebounding capital markets activity,
a better loan growth environment in 2025, an acceleration in buybacks post Basel Endgame re-proposal, and attractive relative valuation,” he said.

The focus now shifts to the general election, Wilson said. The three high-level dynamics which are still important, according to the strategist, are:

• business cycle remains more important than the election outcome.
• on average, volatility picks up in September of election years and stays elevated through October before decelerating in November.
• history is supportive of a quality bias in election years.

WisdomTree Senior Economist and Wharton Professor Emeritus Jeremy Siegel also expressed a preference for quality names. “Looking ahead, I see opportunity if the current resilience continues,” the economist said.

“Stocks are not cheap by historical standards, but with the fear gauge elevated and investors still largely hedging their bets, we could see a sharp move higher if sentiment turns more positive,” he added.

Siegel said quality remains the key for investors. Small caps are catching up a bit but the fundamentals of large-cap tech companies continue to drive performance, he said. “With inflation moderating and the Fed's easing cycle beginning, sectors like financials and industrials could benefit from a more favorable economic backdrop,” he added.

Early reports from banks have been solid and could set the tone for broader market gains, the economist said.

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Upcoming Economic Data

Stocks In Focus:

Commodities, Bonds And Global Equity Markets:

Crude oil plunged over 4.50% in the early New York session after reports said Israel won’t launch an attack on Iran’s crude oil infrastructure, and gold futures were modestly higher. Bitcoin (CRYPTO: BTC) firmed up over the past 24 hours and traded above the $65.5K level. The benchmark 10-year old Treasury note yield weakened slightly to 4.065%.

In Asia, Hong Kong and Chinese markets retreated sharply as a string of recent weak data weighed down on sentiment, even as traders looked ahead to further stimulatory measures from the government and the central bank. Most other major markets advanced, taking cues from the positive performance of Wall Street stocks overnight.

European stocks traded mostly lower in early hours amid falling oil prices.

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