Stocks open higher as Merck and Caterpillar jump
The Dow Jones industrial average rose 57 points at the open, with Merck as the best-performing stock in the index. The S&P 500 gained 0.2 percent, with consumer discretionary leading nine of 11 sectors higher. The Nasdaq composite advanced 0.3 percent.
Shares of Merck rose 2 percent after an upgrade from Goldman Sachs. Analysts at the investment bank said the Dow member's sales could boom because of Keytruda, a blockbuster drug used to treat lung cancer.
Caterpillar climbed 1.5 percent after Citi raised its rating on the Dow component, citing a construction rebound in China. Citi also points to positive estimate revisions and increased capital returns as reasons for the upgrade.
Rates also climbed on Monday. The 10-year Treasury note yield hit a high of 2.99 percent, threatening once again to reach 3 percent. The benchmark rate last traded at 3 percent or higher in January 2014. Investors have been selling Treasurys this month — pushing yields higher — amid expectations of rising inflation, which could prompt the Federal Reserve to tighten monetary policy at a faster pace.
"The longer the Fed can keep the expansion going, the more bullish that should be for stocks even though the short-term increase in interest rates creates somewhat more competition from bonds in this scenario," Ed Yardeni, president and chief investment strategist at Yardeni Research, said in a note. "Besides, the Fed's ongoing tightening confirms that the economy is strong enough to absorb the gradual normalization of monetary policy."
Wall Street also braced for the busiest week of the earnings season. More than 170 companies are expected to have released their quarterly results by the end of the week, including Alphabet, 3M, Amazon and Chevron.
Hasbro, Halliburton and Alaska Air all posted quarterly results before the bell Monday. Shares of Hasbro fell more than 4 percent after its earnings and sales fell short of estimates. Halliburton's quarterly profit matched analyst expectations, while its revenue missed. Alaska Air reported a stronger-than-expected profit but disappointing revenue.
Overall, this earnings season has been strong thus far. More than 82 percent of S&P 500 companies that have reported through Monday morning have topped earnings estimates, according to FactSet.
Elsewhere in corporate news, Lululemon slipped 2.3 percent after Needham said it faces headwinds from strong year-over-year sales comparisons moving forward.
In economic data, a flash reading of the latest composite purchasing managers' index (PMI) will be published 9:45 a.m. ET, while existing home sales will follow shortly after, at 10 a.m. ET.