U.S. stocks shook off early losses to finish mostly higher Monday, with buying in consumer discretionary and information technology helping to buttress the broader market, despite a report that revealed slower-than-forecast growth in China that was blamed for early weakness.
On Friday, after the release of stronger-than-forecast retail sales figures, the Dow Jones Industrial Average rose 382 points, or 1.1%, to 35,295, the S&P 500 increased 33 points, or 0.8%, to 4,471, and the Nasdaq Composite gained 74 points, or 0.5%, to 14,897.
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Buying in consumer discretionary SP500.25, +0.10%, technology shares XLK, +0.42% and communication services SP500.50, +0.43% gave the broader market a bit of a boost, as investors attempted to shake off an earlier dour mood on Wall Street that had been partly prompted by concerns about the economic health of the world’s second-largest economy.
China reported 4.9% year-over-year growth in the third quarter, a big slowdown from the 7.9% recorded in the second quarter, as construction output slowed.
Hand-wringing about stuttering global growth and surging inflation has helped to check the bulls somewhat, as crude-oil futures CLX21, -0.76% touched multiyear highs before retreating on the day. Concerns about inflation also were on display across the pond, before trickling over into U.S. markets.
U.K. bond yields TMBMKGB-02Y, 0.727% rose after Bank of England Gov. Andrew Bailey said the central bank would have to act to quell inflation, raising the prospect of rate increases in the country. U.S. central bank officials, as a whole, haven’t been as alarmed by the rise in prices.
A stunning rally in energy prices has been cited as further reason to cast doubt on the prospect for strong global growth in the wake of the COVID-19 pandemic, with analysts concerned that the U.S. could be stunted.
Read: Here’s when soaring oil prices could make the stock market sputter
“An astonishing increase in the price of energy has seen European natural gas prices rise almost fivefold since the start of the year, fueling inflationary fears and concerns about a global slowdown,” wrote Seema Shah, chief strategist at Principal Global Investors, in emailed comments.
However, the strategist said that the U.S. may be more insulated from the effects of that crisis, which she said could fuel outperformance by U.S. markets.
“For its part, however, the U.S. is in a relatively good position to weather the shock. It’s energy self-sufficient, and consumers have significant excess savings to absorb higher prices. In contrast, as a large net importer of energy, Europe is more exposed,” Shah wrote.
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The moves in stocks come against the backdrop of third-quarter earnings season, which kicks into higher gear this week with releases from Netflix NFLX, +0.32%, Tesla TSLA, +0.04%, and International Business Machines IBM, -0.68%, among others.
“People are focused on economic and earnings fundamentals, which remain strong,” said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management Company in Milwaukee. “The reality is consumers have a lot of cash to deploy and corporations remain in a good spot.
“Inflation is still the biggest wild card, but to me the way to position for an inflationary environment is in equity markets, not bond markets, especially if the Fed is going to be patient about raising rates,” Schutte said via phone.
In economic reports, a reading of U.S. industrial output was down 1.3% in September. The reading for August was revised lower to a decline of 0.1% from a gain of 0.4%.
The National Association of Home Builders said its monthly confidence index increased four points to a reading of 80 in October — the highest reading since July.
“The U.S. economy is generally in good shape and, all in, the story is a relatively good story compared to other major regions of the world,” said Rich Sega, global chief investment strategist at Conning, which has $209 billion in assets under management. “A lot of people have been concerned about the sustainability of the expansion, but I’m feeling pretty good about that and earnings.”
—Steve Goldstein contributed to this article.
Surging oil prices may account for the stock market's sideways performance since early September, says one Wall Street analyst.
Vivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter @vivienlouchen.
Mark DeCambre is MarketWatch’s markets editor. He is based in New York. Follow him on Twitter @mdecambre.