S&P 500 notches fourth day of gains as investors await key earnings

A number of big names are set to report in the week ahead, including Netflix, Johnson & Johnson, United Airlines and Procter & Gamble on Tuesday. Tesla, Verizon and IBM are among the other names on deck for the week.

Strong results from the first week of earnings, including from the largest banks, have pushed the major averages to within striking distance of their all-time highs. The Dow is nearly 1% from its record high, while the S&P 500 and Nasdaq Composite are 1.3% and about 2.5% below their records respectively.

A few things dented sentiment initially on Monday. Overnight, China reported GDP that disappointed, coming in at 4.9% annual growth in the third quarter. That was short of the 5.2% growth expected by economists polled by Reuters. Industrial production in China last month also fell short of expectations.

U.S. industrial production declined in September as supply constraints continued to hinder manufacturing. Output fell almost 1.28% to its lowest level since February, when it fell 3.02%, according to data released Monday by the Federal Reserve.

The 10-year Treasury yield climbed as high as 1.627% on Monday. Rising rates have caused some pressure in tech shares at times this year.

Disney shares lost 3% after Barclays downgraded the stock and predicted streaming subscriber growth will slow.

But the major averages are coming off a winning week due to strong earnings reports, and results later this week could change the tone back to bullish if they follow the same trend. The Dow advanced 382 points Friday, ending the week with a 1.58% gain for its best week since June. The S&P 500 rose 1.82% last week for its best week since July, while the Nasdaq Composite saw its best week since the end of August, with the tech-heavy index adding 2.18%.

In addition to better-than-expected earnings from Goldman Sachs on Friday, positive economic data also boosted stocks. Retail sales rose 0.7% in September, the Census Bureau said Friday, while economists surveyed by Dow Jones were expecting a decline of 0.2%.

"Wall Street was expecting a slowdown in spending, but it turns out the U.S. consumer is not to be messed with," said Edward Moya, senior market analyst at Oanda. "Back-to-back months of better-than-expected retail sales data shows the consumer looks strong heading into the holiday season," he added.

As earnings season gets into full swing, investors will be watching for company commentary around supply chain bottlenecks and inflation, among other things.

So far 41 S&P 500 components have reported third-quarter results, with 80% of them topping EPS expectations, according to data from FactSet. Taking into account the companies that have already reported and estimates for the rest, third-quarter profit growth will total 30%, the third highest quarterly growth rate for S&P 500 companies since 2010, according to FactSet.

"Growth in 2022 seems likely to be lifted by the lagged impacts of monetary stimulus, the lagged impacts of surging Consumer Net Worth, reopening, and inventory rebuilding," Ed Hyman, Evercore ISI Chairman, wrote in a note to clients Sunday. "Supply chain problems are likely to ease, and unfilled demand from this year is likely to be met next year. Wages are likely to increase, lifting consumer incomes."

Bitcoin pulled back from its recent high, but held above $60,000 on Sunday, according to data from Coin Metrics, as the first bitcoin futures exchanged-traded fund gets set to begin trading this week. Bitcoin gained more than 1% to touch $61,478.79 Monday afternoon.