Stocks mostly gained on Monday, extending last week's advances and reaching fresh all-time highs at the start of a busy week for new economic data.
The S&P 500 and Nasdaq each edged up to set record intraday levels. The Dow traded flat to slightly higher.
Optimism that the Federal Reserve will not immediately and jarringly remove its highly accommodative monetary policies has helped buoy equities over the past several sessions. Namely, Federal Reserve Chair Jerome Powell said in a virtual Jackson Hole Symposium speech on Friday that an "ill-timed policy move" while the pandemic is still denting economic activity could be "particularly harmful," suggesting the central bank leader was inclined to ensure the recovery was on a steady path forward before changing policies.
Still, he noted that "it could be appropriate to start reducing the pace of asset purchases this year" in the Fed's quantitative easing program if the recovery continues as expected.
Powell "did three things very, very right, and obviously the markets are celebrating that," Julian Emanuel, BTIG chief equity and derivatives strategist, told Yahoo Finance on Friday, adding that the first was in keeping the speech succinct.
"Second thing he did right is, he sent the rest of the Fed governors out over the prior four weeks to basically tell us all that the taper was coming," Emanuel added. "He merely had to reiterate, and reiterate softly, that message, which he did very effectively."
"Then the third thing ... is that he really tackled inflation head on. He knew that that's been the preoccupation of the markets for these last couple of months," Emanuel said. "While he didn't give any new real evidence as to why he views inflation as transitory, he did cite the ongoing moderation in commodity prices and the view that past history would indicate that inflation is likely to be transitory."
Investors are set to receive more data on the strength of the labor market recovery this week, with the Labor Department's August jobs report due out on Friday. Consensus economists are looking to see that 750,000 payrolls came back during the month, representing an eighth straight month of gains but a slight pullback from July's 943,000.
The report will be another important data point in informing the Fed's monetary policy plans going forward. Federal Reserve Governor Christopher Waller told Yahoo Finance's Brian Cheung on Friday that he would support beginning the Fed's asset-purchase tapering process as soon as this fall if the August jobs report shows another strong payroll gain. The Fed next convenes for a policy-setting meeting on Sept. 21 and 22.
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1:44 p.m. ET: 'Valuations have become a little bit more attractive over the course of the past few months': CIO
The S&P 500 has continued to log new highs this year, fueled by a combination of a recovering economic, still-accommodative Federal Reserve, and rebound in corporate profits. The recovery in earnings especially has helped bring down valuations even as stock prices marched higher.
"Valuations have become a little bit more attractive over the course of the past few months, not because prices have decreased — as we've seen 53 different days of record closes for the S&P 500 in 2021 thus far — but because of the strength in earnings," Kevin Mahn, chief investment officer of Hennion & Walsh, told Yahoo Finance. "As it stands right now, the P/E [price-to-earnings] ratio of the S&P 500 is roughly 27. Now, that's high relative to a 10-year average P/E for the market of roughly 19.5, but it's much lower than the 32.5 level where we were just a couple of months ago."
"Then we see these updated year-end forecasts from the likes of Goldman Sachs, forecasting a 4,700 level at the end of the year, [and] Wells Fargo, 4,850 by the end of the year," Mahn added. "And that suggests to us that there's more upside potential for the markets between 4-7%, but perhaps even more in certain select areas of the market such e-commerce, biotechs or some of those more revolutionary technologies such as cybersecurity, blockchain and even artificial intelligence."
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1:26 p.m. ET: Travel stocks fall after EU recommends U.S. travel halt amid Delta surge
Shares of travel and leisure stocks slid Monday afternoon after the European Union issued a new recommendation to restrict nonessential travel to member countries from the U.S. due to rising COVID-19 cases. Previously, the EU added the U.S. to a travel safe lift in June.
Shares of airlines came under pressure following the news. United Airlines (UAL), Delta Air Lines (DAL) and American Airlines (AAL) were each off more than 3% intraday following the news. Other travel-related stocks including Wynn Resorts (WYNN), Marriott International (MAR) and Hilton Worldwide Holdings (HLT) also dipped.
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10:33 a.m. ET: Dallas Fed Manufacturing Activity index sinks to 9.0 in August
The Dallas Federal Reserve's monthly manufacturing activity index dropped far more than expected in August but still held at a level consistent with expansion in the region's goods-producing sector.
The headline index reached 9.0 in August, sinking from 27.3 during the prior month. Consensus economists were looking for 23.0, according to Bloomberg data.
Beneath the headline index, the production index fell to 20.8, dipping by about 10 points compared to July. New orders, capacity utilization, shipments and outlook indices each also dropped. Meanwhile, the outlook uncertainty index rose to its highest level since May 2020 in August, reflecting fresh concerns over the Delta variant's impact on demand.
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10:03 a.m. ET: Pending home sales unexpectedly dropped in July
Pending home sales posted a second straight monthly decline in July, data from the National Association of Realtors showed Monday morning, with surging home prices deterring new buyers from coming into the market.
Contract-signings for homes dipped by 1.8% in July compared to June, nearly matching June's 2.0% monthly decline. Consensus economists were looking for pending sales to tick up by 0.3% in July, according to Bloomberg consensus data. Over last year, pending home sales dropped 9.5% on an unadjusted basis.
By region, pending home sales increased in the Northeast and Midwest, but dropped on a monthly basis in both the South and West.
"The moderate slowdown in sales is largely due to the huge spike in home prices," Lawrence Yun, chief economist for the National Association of Realtors, said in a press statement. "The Midwest region offers the most affordable costs for a home and hence that region has seen better sales activity compared to other areas in recent months."
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9:33 a.m. ET: Stocks open in the green
Here's where markets were trading just after the opening bell:
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S&P 500 (^GSPC): +10.11 (+0.22%) to 4,519.48
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Dow (^DJI): +16.67 (+0.05%) to 35,472.47
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Nasdaq (^IXIC): +55.05 (+0.35%) to 15,182.54
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Crude (CL=F): -$0.09 (-0.13%) to $68.65 a barrel
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Gold (GC=F): -$2.30 (-0.13%) to $1,817.20 per ounce
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10-year Treasury (^TNX): -0.8 bps to yield 1.304%
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7:32 a.m. ET Monday: Stock futures edge higher
Here were the main moves in markets as of 7:32 a.m. ET:
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S&P 500 futures (ES=F): +4 points (+0.09%) at 4,509.50
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Dow futures (YM=F): +16 points (+0.05%) to 35,419.00
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Nasdaq futures (NQ=F): +18 points (+0.12%) to 15,444.50
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Crude (CL=F): -$0.29 (-0.42%) to $68.45 a barrel
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Gold (GC=F): -$1.00 (-0.05%) to $1,818.50 per ounce
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10-year Treasury (^TNX): -0.3 bps, yielding 1.309%
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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