US equity indexes traded mixed midday Monday after the Dow Jones Industrial Average lagged the S&P 500 and the Nasdaq Composite amid gains in technology and consumer discretionary sectors.
The S&P 500 rose 0.5% to 6,082.2, and the Nasdaq climbed 1.2% to 20,173.4, with the latter touching a fresh intraday record high of 20,174.3. The Dow fell 0.1% to 43,798.1. Broadcom (AVGO), Tesla (TSLA), and Alphabet (GOOG, GOOGL) topped the list of mega-cap gainers. Energy stocks declined the most intraday.
While the S&P 500 Index's price/earnings ratio, a valuation measure, is elevated by historical standards, it is still "reasonable given the evolution of the index as well as our expectations for future earnings growth," according to a note from Wells Fargo Investment Institute.
"Stocks are not in a bubble, and investors should not let an above average P/E ratio keep them from participating in the continuation of the bull market we see in 2025," the note said. A 5% to 10% pullback in the current environment represents "a buying opportunity."
While the valuation debate rages, investors will likely focus squarely on policy announcements from the Federal Reserve on Wednesday. The consumer price index and other price data released last week imply that the Personal Consumption Expenditures Price Index print for November will grow 0.1% month-over-month, reinforcing the disinflation trend, Morgan Stanley said in a note.
"We have to see just how cautious [Fed] Chair [Jerome] Powell sounds this week and in January, and our baseline of cuts in March and May will be challenged if future data releases show a reversal, whether from residual seasonality or a pass-through from newly imposed tariffs," the note said.
Meanwhile, most US Treasury yields rose intraday. The 10-year climbed less than one basis point to 4.40% intraday, trading close to its highest in about three weeks.
"Paring back on cuts for 2025 will help ease concerns from more hawkish Fed members but could create some bond market volatility if the Fed's year-end 2025 median projection widens from futures market expectations," the Wells Fargo note said.
In economic news, the December flash reading of manufacturing conditions from S&P Global fell to a three-month low of 48.3 from 49.7 in November, compared with 49.5 anticipated in a survey compiled by Bloomberg.
In company news, US Vice President Kamala Harris said Tuesday that Micron Technology (MU) received a $6.1 billion investment under the CHIPS and Science Act to fund the construction of memory chip facilities in Clay, New York, and Boise, Idaho. Micron shares surged 7.2% intraday, among the top performers on the S&P 500 and the Nasdaq.
West Texas Intermediate crude oil futures fell 0.5% to $70.96 a barrel.
Gold fell 0.2% to $2,669.8 an ounce, while silver rose 0.1% to $31.07 per ounce.
