Dow closes above 38,000 for first time and S&P 500 scores back-to-back records

Even with both the Dow and the S&P 500 logging new all-time highs, stocks may still have more room to rise for the rest of the year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“I think the outlook for this year was still pretty positive, particularly if earnings can grow on a year-over-year basis,” Saglimbene said in a phone interview.

“If we can get through the earnings season and outlooks can be fairly positive, I do think stock prices will rise higher. And I do think there’s opportunity outside of big tech for some of last year’s laggards to start to participate,” he added.

Some other investors are more skeptical, questioning the rally’s staying power given stretched valuations.

“With forward multiples already at historic peaks and earnings forecasts for 12 months forward ambitious, equity-market gains may stall in 2024, as better earnings are met with lower valuation multiples characteristic of a midcycle or soft-landing environment,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note.

While 2023 S&P 500 index earnings are currently forecast to land at $219-$221, the 2024 consensus is running at $242-$244. Morgan Stanley’s estimates are slightly below that, Shalett said.

“To push the index through 5,000, investors will need to confidently price upside to $250 by midyear. This is a potential stretch, given the level of uncertainty we expect,” she wrote.

Need to Know: The stock market needs better earnings to keep climbing. It’s not going to get them, warns JPMorgan.

Matthew Tuttle, the chief executive and chief investment officer at Tuttle Capital Management, said the tech companies known as the “Magnificent Seven” have now technically moved into overbought conditions.

“My sense is that we don’t go anywhere fast until we work out the disagreement between the market and the Fed on rate cuts — but don’t underestimate the power of the bulls when they get going,” Tuttle said.

Read: Tech leads stock market’s January rally by wide margin. Watch out for February.

Earnings season ramps up this week, with results due from companies including IBM
IBM,
+0.79%,
Netflix
NFLX,
+0.57%
and Tesla
TSLA,
-1.60%.

Earnings Watch: Price increases drove corporate profit margins to historic highs during the pandemic. In 2024, cost cuts could help them resume their ascent.

The Conference Board’s leading economic index for the U.S. economy fell again in December to mark the 21st decline in a row, but a widely predicted recession still appears no closer than when the long losing streak began. The leading index slid 0.1% last month, which was smaller than the 0.3% drop forecast by economists polled by the Wall Street Journal.

Of note later this week will be the release of gross domestic product figures and the personal consumption expenditures measure of inflation, as well as interest-rate decisions from the European Central Bank and the Bank of Japan.

Companies in focus

• Archer Daniels Midland Co.
  ADM,
  -24.20%
  was in the spotlight on Monday as the agribusiness giant said it put its chief financial officer on administrative leave as it investigates accounting at its nutrition segment. Shares closed 24.4% lower.

• Sunoco LP
  SUN,
  -4.57%
  and NuStar Energy LP
  NS,
  +18.25%
  said Monday that they have agreed to combine in an all-stock deal valued at about $7.3 billion, including debt. NuStar shares jumped 18.4%, while Sunoco shares dropped 4.6%.

• Shares of Dow component Boeing Co.
  BA,
  -0.04%
  edged down less than 0.1% after the Federal Aviation Administration recommended that more aircraft models from the aerospace giant have their door plugs inspected.

• Shares of Gilead Sciences Inc.
  GILD,
  -10.15%
  finished 10.2% lower, pulling back from an 11-month high, after the biotechnology company reported disappointing lung-cancer trial results.

Read: Stock-market investors face an ugly election season. Can bulls take comfort in history?

Steve Goldstein contributed.