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U.S. Stocks Advance for Second Consecutive Session

Major U.S. stock indexes kicked off the week with gains, rising for a second consecutive session and recouping some losses from the summer stock-market slide. 

The gains were broad-based, with 10 of the S&P 500’s 11 sectors closing in positive territory. The S&P 500 notched its first back-to-back gain of the month after edging lower for much of August. 

The index rose 0.6%, while the tech-heavy Nasdaq Composite added 0.8%. The Dow Jones Industrial Average added 213 points, or 0.6%. 

Monday’s moves continue a remarkable stretch of calm for major indexes during the summer months. The S&P 500 hasn’t notched a one-day move of 2% in either direction in more than six months, the calmest stretch since 2018 and one of the longest of the past 25 years, according to research firm Asym 500.

Some investors said they expected stocks to continue their climb in coming weeks. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said corporate earnings and data on the economy have impressed him. Now, he is positioning for the market to continue its ascent and is particularly optimistic about corners of the market such as industrials and financials.

“There’s no reason the stock market can’t go higher,” Zaccarelli said.

Shares of companies whose fortunes are most tied to the economy outperformed. The Russell 2000 index of smaller companies beat the S&P 500, rising 0.8%. Shares of industrials companies such as Tractor Supply, which sells farm equipment, also jumped past the index. 

The outperformance shows how investors have increasingly ramped up bets that the domestic economy will keep humming along, despite higher interest rates. Later this week, investors will be parsing inflation data and the monthly jobs report for more clues on how the economy is faring. For now, many are taking a more optimistic stance. 

“The soft landing is the consensus now,” said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management. 

The yield on the 10-year Treasury note fell to 4.210%, from 4.239% Friday.

Investors came away from Federal Reserve Chair Jerome Powell’s speech Friday expecting interest rates could stay higher for longer. Traders were recently assigning a 57% probability to the central bank lifting rates again by the end of the year, up from 54% on Friday and 32% a week earlier, according to CME Group’s FedWatch tool.

And they are betting rates will stay high for some time. By June 2024, traders see a 58% chance the Fed will have cut rates from current levels, down from 62% on Friday and 83% a week before that.

“We think the Fed is going to preserve their optionality as much as possible,” said Steve Brown, senior managing director at Guggenheim Investments. 

In corporate news, Hawaiian Electric shares leapt 45% after the utility pushed back against claims that its power lines caused the deadly Lahaina wildfire.

Shares of 3M rose 5.2% after The Wall Street Journal reported that the company was nearing a settlement regarding claims that it sold the military earplugs that didn’t protect users from hearing loss.

Stocks in mainland China rose Monday, after the government cut a tax on trading and said it would take more steps to revive its sagging capital markets. The move is an attempt to address a slide in Chinese stock prices this year, as investors have dumped shares amid worsening economic news and big rallies elsewhere.

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