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Earnings have been good so far, with most topping analysts’ expectations.
The Dow Industrials and S&P 500 hit fresh record highs on Monday, as earnings season kicked into high gear in one of the heaviest reporting weeks of the quarter with bellwethers in multiple sectors poised to announce results.
While the Dow and S&P hit new highs, the Nasdaq outperformed on the day, buoyed by gains in Tesla and PayPal.
Tesla Inc jumped 11.56 percent to its own new record of $1,019.37 and breached $1 trillion in market capitalization, after car rental firm Hertz placed an order for 100,000 Tesla cars, while Morgan Stanley raised its price target on the stock to $1,200 from $900 per share.
Tesla, which has risen in nine of the past 10 sessions and is up more than 28 percent for the month, provided the biggest boost to the S&P 500 and the Nasdaq. Also helping to lift the two indexes was PayPal Inc, which gained 3.76 percent after the payments company scrapped plans to buy the digital pinboard site Pinterest Inc for as much as $45bn. Shares of Pinterest slumped 13.01 percent.
“[Tesla] is moving weirdly with energy but also renewables … people finally figured out that if natural gas is at the equivalent of $180 a barrel that is probably good for renewables,” said Jay Hatfield, founder and CEO of Infrastructure Capital Management in New York.
“Also, it looks like we are going to get the Build Back Better law and infrastructure with a lot of tax credits for renewables, so that is positive.”
United States President Joe Biden on Monday held out hope for an agreement on his major spending plans before attending a climate summit in Scotland, while the White House said Democratic negotiators were closing in on a deal.
The Dow Jones Industrial Average rose 0.25 percent to 35,765.23, the S&P 500 gained 0.55 percent to 4,569.89 and the tech-heavy Nasdaq Composite Index added 0.98 percent to 15,237.60.
Shares of Facebook Inc were up 0.31 percent ahead of its quarterly results due after market close. Investors fear that as happened with Snap Inc, the social media giant’s ad revenue could face the brunt of Apple Inc’s privacy changes.
Other mega-cap names scheduled to report this week include Apple, Microsoft Corp and Google parent Alphabet Inc.
This week, 165 components of the S&P 500 are expected to post quarterly results, according to Refinitiv data. Analysts expect earnings at S&P 500 companies to grow 34.8 percent year-on-year for the third quarter.
Investors are also assessing how companies are navigating supply-chain bottlenecks, labour shortages and inflationary pressures to sustain growth. Of the 119 companies in the S&P 500 that have reported earnings through Monday morning, 83.2 percent have topped analysts’ expectations.
“Earnings have been good so far; there is always positive vibes in earnings because you have warnings before it starts of course,” said Hatfield. “But for some supply-chain problems, generally the economy was strong so people were positioning ahead of earnings.”