S&P, Dow Rise to Fresh Record Highs

The Nasdaq Composite Index added 136.51 points, or 0.9%, to 15226.71.

Strong earnings from banks, consumer companies and manufacturers have soothed investors’ concerns about higher inflation and labor shortages.  Now all eyes are set on technology stocks, which have a weighting of nearly 30% in the S&P 500.

Facebook shares jumped in after-hours trading after it reported earnings on Monday afternoon. Microsoft, Twitter and Alphabet, Google’s parent company, are scheduled to report earnings Tuesday. Apple and Amazon.com are expected to report later in the week. 

“Without a doubt, tech is the most important sector to the S&P overall,” said Eric Mintz, portfolio co-manager at Eagle Asset Management. “I broadly expect earnings from the tech sector to be robust.”

Shares of PayPal jumped $6.48, or 2.7%, to $246.88 after it said it wasn’t pursuing a takeover of Pinterest. Reports last week of a potential deal sent PayPal’s shares down. Pinterest shares tumbled $7.38, or 13%, to $50.68. 

Tesla shares climbed $115.18, or 13%, to $1,024.86, closing at an all-time high. Tesla’s market cap ballooned above $1 trillion for the first time, and the company surpassed Facebook as the fifth largest U.S. company by market cap. Hertz said it was ordering 100,000 Teslas. 

Michael Hewson, chief markets analyst at CMC Markets, said that one notable takeaway from earnings reports so far has been “the ability of companies, for the most part, to pass on increases in prices onto their customers without seeing a drop in sales.”

Still, disappointing results last week from social-media company Snap could be a “canary in the coal mine for the rest of the tech sector,” Mr. Hewson said. Snap warned that tougher privacy rules from Apple would likely crimp its advertising sales. If other tech giants post dour outlooks, investors “could see the mood sour quite quickly,” Mr. Hewson said.

A key question for investors is how global central banks will respond to rising prices. Recent trading in short-dated U.K. gilts suggests investors think the British government may raise interest rates as soon as November. Investors await comments from the European Central Bank and the Bank of Japan, which both have meetings scheduled this week. The Federal Reserve has signaled a possible rate increase next year, and officials could start scaling back pandemic-era stimulus at the November meeting.

“It’s very normal at this stage in the game, when the Fed starts taking away the punch bowl, for dividend growth stocks to outperform,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management. “It seems like the complexion of the market has changed and the tone that investors are valuing.”

Money managers are also closely watching negotiations among U.S. lawmakers about the fate of President Joe Biden’s sweeping social-policy spending package. House Speaker Nancy Pelosi said Sunday that she was optimistic an agreement could be reached this week on the framework for the legislation, and a vote on a separate infrastructure funding bill. 

Government spending on that scale “will continue to support growth,” said Esty Dwek, chief investment officer at Swiss online bank FlowBank. “The question now is more about taxes and how they will pay for it.” 

The yield on the benchmark 10-year Treasury note ticked lower to 1.634%. Yields move inversely to bond prices.

Brent crude, the global oil benchmark, gained 46 cents per barrel, or 0.5%, to $85.99, the highest settle value in three years.

Overseas, the pan-continental Stoxx Europe 600 was relatively flat. HSBC rose after it reported a jump in third-quarter profit and said it would spend up to $2 billion on stock buybacks.

Volvo Cars cut the size of its Stockholm stock-market listing and priced its shares at the bottom of its suggested range, suggesting it had struggled to attract enough investor interest. It also pushed back its trading debut to Friday.

In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.8% while Japan’s Nikkei 225 slipped 0.7%. Shares of Panasonic rose after the Japanese company said it was manufacturing a more powerful lithium-ion battery that it expected to supply to Tesla.

The Turkish lira depreciated to its weakest level on record before recovering some ground and trading at around 9.66 lira to the dollar Monday. Over the weekend, President Recep Tayyip Erdogan threatened to expel the U.S. ambassador and top diplomats from nine other Western countries.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com