U.S. stocks closed higher on Monday, with the Dow Jones Industrial Average finishing above the 38,000 milestone for the first time in history as fourth-quarter earnings season ramps up.

What happened

  • The Dow Jones Industrial Average
    DJIA
    went up 138.01 points or 0.4% to end at 38,001.81, its third record close this year, according to Dow Jones Market Data. It is also the first time the index has closed above 38,000 in history.

  • The S&P 500
    SPX
    rose 10.62 points or 0.2% to finish at 4,850.43, its second record close in 2024.

  • The Nasdaq Composite
    COMP
    advanced 49.32 points or 0.3% to end at 15,360.29, its highest finish since Jan. 4, 2022.

What drove markets

Including Monday, it has been 25 trading days since the last 1,000-point milestone for the Dow, which is the shortest time between milestones since the period between 33,000 and 34,000, according to Dow Jones Market Data. Of course, such milestones are less impressive on a percentage basis the higher the blue-chip index rises, with the move from 37,000 to 38,000 representing a 2.7% rise.

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

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

Steve Goldstein contributed.