New York: Major US stock indices edged to records for a second straight session on Monday in a quiet opening to a heavy news week with major earnings, a Federal Reserve meeting and US-China trade talks.
Despite fresh records from the S&P 500 and Nasdaq, “caution was palpable,” said a note from Charles Schwab that alluded to market-moving events later in the week.
The US central bank is due to meet starting Tuesday, with markets overwhelmingly expecting the central bank to leave interest rates untouched, something that has contributed to the good mood among investors.
With nearly half the companies in the S&P 500 having already reported, earnings this so far quarter are on average 5.3 per cent above analyst estimates, a figure above the five-year average, according to FactSet.
The mostly solid results has reassured investors who had been girding for weaker earnings.
Major companies reporting this week include Apple, General Motors and Pfizer.
Shares of Google parent Alphabet plunged 7.2 per cent in after-hours trading on Monday after the company reported a 29 per cent drop in quarterly earnings to $6.7 billion on slower-than-expected revenue growth.
The focus in Europe was firmly on Spain, which now faces weeks of coalition talks after Prime Minister Pedro Sanchez’s Socialists won snap elections on Sunday without a majority, splitting the right-wing bloc but letting ultra-nationalists into parliament.
“A long-lasting political impasse can negatively affect the economy, causing companies and consumers to postpone investment decisions and wait to recruit,” said Steven Trypsteen, an economist at ING.
With the country set to return to the polls on May 26 for regional, local and European Parliament elections, a new government is not likely to be formed before June.
US-China trade deal?
Madrid’s benchmark IBEX 35 index closed a touch higher, having spent most of the session in negative territory.
Paris, London and Frankfurt all finished modestly higher.
Sentiment was also hobbled by news that economic confidence in the single currency area sank in April to hit the lowest level for more than two years.
Hong Kong stocks rose one per cent and Singapore added 1.3 per cent, while Shanghai slipped 0.8 per cent on concerns that Chinese authorities will wind back on recent market-boosting monetary easing measures. Tokyo was shut for a holiday.
Eyes now turn to Beijing, where top US negotiators are due for another round of trade talks with their Chinese counterparts.
“I think there’s a strong desire from both sides to see if we can wrap this up or move on,” US Treasury Secretary Steven Mnuchin said in an interview on Fox Business.
“We hope within the next two rounds — in China and in DC — to be at the point where we can either recommend to the president we have a deal or make a recommendation that we don’t.”