The US stock market ended slightly higher on Monday, as investors weighed the prospects of a soft landing for the economy amid easing inflation pressures and solid corporate earnings. The S&P 500 (^GSPC) rose 0.2%, the Dow Jones Industrial Average (^DJI) gained 0.1%, and the Nasdaq Composite (^IXIC) added 0.3%.
A soft landing is a term used to describe a situation where the economy slows down gradually without falling into a recession or triggering a sharp rise in inflation. This would allow the Federal Reserve to maintain its accommodative monetary policy and support the recovery.
Some analysts and economists have expressed optimism that the US economy could achieve a soft landing in 2023, as inflation cools down and growth remains resilient. The latest data on consumer and producer prices showed that inflation eased in November, suggesting that the supply chain bottlenecks and labor shortages that have pushed up costs are starting to ease.
Meanwhile, the US labor market continues to show signs of strength, with the unemployment rate falling to 4.2% in November and job openings reaching a record high of 11 million in October. The consumer sentiment index also improved in December, indicating that Americans are more confident about their economic prospects.
Another factor that boosted the stock market on Monday was the strong performance of corporate earnings. According to FactSet, more than 90% of the S&P 500 companies have reported their results for the third quarter of 2023, and 84% of them have beaten the analysts’ expectations. The blended earnings growth rate for the quarter was 39.2%, the second-highest since 2010.
Some of the notable companies that reported their earnings on Monday included Oracle (ORCL), which beat the estimates on both revenue and earnings, and Adobe (ADBE), which also topped the expectations but issued a weaker-than-expected guidance for the current quarter. Both stocks rose in after-hours trading.
Among the individual stocks that moved the market on Monday, Tesla (TSLA) was one of the biggest gainers, surging 7.4% to a new record high of $1,219. The electric vehicle maker benefited from a bullish note from Morgan Stanley, which raised its price target on the stock to $1,500 and said that Tesla’s artificial intelligence platform could add $500 billion to its market value.
On the other hand, Apple (AAPL) was one of the biggest losers, dropping 2.6% to $171. The tech giant faced a setback in its legal battle with Epic Games, the maker of Fortnite, after a federal appeals court ruled that Apple must allow app developers to direct users to alternative payment methods. This could hurt Apple’s revenue from its App Store, which accounts for about 15% of its total sales.
Looking ahead, investors will be watching the outcome of the Federal Reserve’s policy meeting on Wednesday, where the central bank is expected to announce another reduction in its monthly bond purchases and provide more clues on its interest rate plans. The Fed has signaled that it could start raising rates as soon as next year, depending on the inflation and growth outlook.
Other key events this week include the retail sales report for November, which will be released on Tuesday, and the housing starts and building permits data for November, which will be released on Thursday. These reports will offer more insights into the health of the consumer and the housing sectors, which are vital for the US economy.