Dow Jones Industrial Average gains as earnings season and Fed rate outlook drive markets
- Stocks rise as earnings and Fed decision offset political uncertainty
- Gold hits record above $5,100 as investors hedge fiscal and trade risks
- Earnings mostly beat, guidance cautious, focus turns to Fed rate outlook
US equities opened the week on a positive note, with the S&P 500 rising 0.5 percent as investors balanced political uncertainty against a heavy slate of earnings and an upcoming Federal Reserve (Fed) decision. The Dow Jones Industrial Average (DJIA) added 0.3 percent, while the Nasdaq Composite gained 0.6 percent, supported by strength in large technology names such as Apple (AAPL) and Meta (META) ahead of their earnings results. The advance followed a volatile prior week, during which the S&P 500 fell about 0.4 percent for a second straight weekly decline amid geopolitical tensions that later eased.
Political risk remained a key backdrop. Markets digested President Trump’s renewed tariff threats toward Canada tied to a possible expansive trade agreement with China, although Canadian officials pushed back strongly, reducing fears of immediate escalation. At the same time, tensions in Washington over federal funding and immigration policy raised concerns about a possible government shutdown, though Senate leadership signaled that a resolution may still be reached. While these issues have not yet triggered a sharp market reaction, the repeated use of trade and fiscal pressure tactics continues to weigh gradually on sentiment.
Political uncertainty and acquisitions lift Gold, economic backdrop holds firm
Safe-haven demand was evident on Monday, as Gold surged to a new all-time high above $5,100 per ounce, reflecting investor caution over political and fiscal risks. Despite this, broader economic signals remain relatively positive. Consumer spending appears resilient, and corporate profitability remains solid, with companies continuing to invest heavily in areas such as artificial intelligence and productivity tools.
Novo Nordisk (NOVO) shares improved, bolstered by bank analysts suggesting the launch of oral Wegovy is expanding the obesity treatment market rather than cannibalizing injectable products. Novo Nordisk shares are up sharply this month, while competitor Eli Lilly (LLY) has lagged. In the commodities and materials sector, Gold miners benefited from the bullion rally, with Newmont (NEM) posting strong gains. Corporate activity also drove individual stocks, including USA Rare Earth (USAR), which jumped after the US government took a stake, and Allied Gold, which rose following a takeover agreement with Zijin Gold, which offered to buy out Allied at $44 per share in an all-cash offer, valuing the deal at $5.5 billion.
Earnings season is moving into a critical phase, with more than 90 S&P 500 companies reporting this week, including several megacap technology firms. Results have been broadly positive thus far, though not as strong as last quarter. About three-quarters of reporting companies have beaten earnings expectations, but again, revenue beats have moderated compared with the prior quarter. Guidance has been conservative, as is typical at this point in the season, and companies that beat both revenue and earnings have not been rewarded immediately in share price performance. Regardless, markets expect the overall earnings picture to remain decent as results broaden beyond financials and early reporters.
On the policy front, the Fed is set to announce its first rate decision of the year, with no change expected. Investor focus will be on forward guidance, particularly signals around the timing of potential rate cuts. Futures markets currently price in two quarter-point cuts by the end of 2026.
Dow Jones daily chart
S&P 500 FAQs
The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.
There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.
Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
