US stocks climb as investors look to continue momentum after best trading week of the year

Markets are looking for a new catalyst to drive fresh gains after a big week. Morgan Stanley and JPMorgan both warned the rally looks set to fade.

• US stocks climbed as traders tried to keep the rally going following the best week of 2023.
• Morgan Stanley and JPMorgan cautioned that the latest gains are set to fizzle. 
• November is historically the best-performing month of the year for the S&P 500.

US stocks traded higher Monday after each of the major indexes recorded their strongest weekly performances of the year last week. 

Major indexes gained more than 5% last week as the Federal Reserve hit pause on further rate hikes and as bond yields retreated. 

But gains Monday were relatively muted as the market looked for direction following the big jump. 

Morgan Stanley strategist Mike Wilson warned that the rally to start November — historically the strongest month for stocks of the year — resembles a bear market rally rather than a sign of market strength. 

He said macro headwinds and a lack of fundamental drivers make any sustained upside seem unlikely.

"We think last week's rally in stocks was mainly a function of the fall in back-end Treasury yields," Wilson wrote in a Monday note. "In our view, the drop in Treasury yields was more related to the lower than expected coupon issuance guidance and weaker economic data as opposed to the bullish interpretation (for equities) that the Fed is going to cut rates earlier next year in the absence of a labor cycle."

In a note later in the day, JPMorgan's Marko Kolanovic echoed Wilson's sentiment, writing that there are a number of concerns that should be on investors' radars that suggest the gains are set to fade. 

"We believe that equities will soon revert back to an unattractive risk-reward as the Fed is set to remain higher for longer, valuations are rich, earnings expectations remain too optimistic, pricing power is waning, profit margins are at risk and the slowdown in topline growth is set to continue," Kolanovic said.

Here's where US indexes stood as the market closed at 4:00 p.m. on Monday: 

• S&P 500: 4,366.00, up 0.18%

• Dow Jones Industrial Average: 34,096.12, up 0.1% (+34.80 points)

• Nasdaq Composite: 13,518.78, up 0.3%

Here's what else is going on: 

• History says the stock market's dismal October points to a rally over the next six months.
• More oil supertankers than ever are headed for the US to load up on crude as OPEC+ curbs supply.
• Here's what it would take for the stock market to notch a new high before 2024.
• The bond vigilantes aren't going away despite the latest Treasury rally, a market veteran said.
• S&P 500 returns haven't been this lopsided since the 2008 financial crisis.
• Rising air pollution in China suggests its economy is growing faster and oil prices will climb.
• Clean energy is the future, but stocks aren't acting like it.
• Foreign bond investors are "extremely concerned" about US deficits while the risk of China and Japan dumping Treasurys looms large.

In commodities, bonds, and crypto: 

• Oil prices climbed, with West Texas Intermediate up 0.47% to $80.88 a barrel. Brent crude, the international benchmark, rose 0.4% to $85.23 a barrel.
• Gold edged lower 0.7% to $1,985.80 per ounce.
• The 10-year Treasury yield rose nine basis points to 4.651%.
• Bitcoin climbed 0.03% to $35,075.