US Stock Indexes Sit at Record Highs Ahead of Earnings Season

The major U.S. stock indexes reached record highs on Monday, propelled by Apple and other tech favorites. The optimism was fueled by the signing of Phase One of the U.S.-China trade deal, as well as upcoming fourth-quarter earnings reports.

Technology shares were at the forefront on Monday with the rally led by Apple Inc., Facebook Inc., Netflix Inc., Microsoft Corp. and Amazon.com Inc. These five stocks powered the benchmark S&P 500 Index and NASDAQ Technology Index to intraday record highs.

In the cash market on Monday, the S&P 500 Index settled at 3288.13, up 22.78 or +0.70%. The Dow Jones Industrial Average finished at 28907.05, up 83.28 or +0.29% and the technology-based NASDAQ Composite Index closed at 9273.93, up 95.07 or +1.04%.

The Catalysts

There were no major economic releases on Monday and the price action suggests investors shrugged off Friday’s somewhat disappointing U.S. jobs report.

The two catalysts behind the strength were an easing of Middle East tensions and the Phase 1 U.S.-China trade agreement, which is expected to be signed in Washington on Wednesday.

Bloomberg, citing sources, reported that the Trump administration planned to lift its designation of China as a currency manipulator, adding to the positive mood.

Fourth-Quarter Earnings On-Tap

Fourth-quarter reporting season kicks off on Tuesday with investors awaiting earnings from big banks JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co.

Analysts expect profits at S&P 500 companies to drop 0.6% for a second consecutive quarter, according to Refinitiv IBES data.

Some traders are saying the data is already stale with the trade deal reached in mid-December. They claim the market is already pricing in much stronger future earnings.

The Internals

According to Reuters, advancing issues outnumbered declining ones on the NYSE by a 2.34-to-1 ratio; on NASDAQ, a 1.65-to-1 ratio favored advancers.

The S&P 500 posted 59 new 52-week highs and 1 new low; the NASDAQ Composite recorded 136 new highs and 23 new lows.

US Budget Deficit Topped $1 Trillion in 2019 for First Time in Seven Years

The U.S. fiscal deficit topped $1 trillion in 2019, the first time it has passed that level in a calendar year since 2012, according to Treasury Department figures released Monday.

The budget shortfall hit $1.02 trillion for the January-to-December period, a 17.1% increase from 2018, which itself had seen a 28.2% jump from the previous year.