Stocks close higher on better-than-expected earnings
The up and down U.S. stock market rose on Tuesday as investors react to earnings beats from companies in the financial and tech sector.
The Dow Jones industrial average rose 75 points, or 0.4%, to 18,162. The Standard & Poor’s 500 stock index gained 13, or 0.6%, to 2140 and the Nasdaq composite jumped 44, or 0.9%, to 5244.
In the past six trading sessions, the Dow has alternated between gains and losses, including a loss Monday of 52 points. Traders have been unwilling to make big bets on stocks as the bulk of the third-quarter earnings season is still ahead, election uncertainty persists and the threat of an interest rate hike from the Federal Reserve later this year looms. Also giving investors pause is concern over the fallout of Britain’s decision to exit the European Union and persistent worries about overvaluation in both U.S. stock and bond markets.
Still, despite the fact that the S&P 500’s earnings have contracted for four straight quarters and are at risk of a fifth quarter of negative growth, profit reports have come through relatively strong early in the third-quarter reporting season, raising hopes that the so-called earnings recession is near its end.
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Early Tuesday, Blackrock (BLK), the world’s biggest money manager by assets, topped earnings per share forecasts by 14 cents and leading U.S. bank Goldman Sachs (GS) had a blowout quarter. Those upbeat profit results followed a big beat after Monday’s close by video streaming company Netflix (NFLX). Shares of Netflix surged 19%, Goldman gained 2.1% and BlackRock rose 0.6%
In a sign of just how cautious professional investors are at the moment, cash levels last month at money management firms hit their highest levels in 15 years, according to Bank of America Merrill Lynch’s October Fund Manager survey. Cash levels jumped to 5.8% this month, up from 5.5% in September, the highest level since Fall 2001 as well as July following the Brexit vote. Investors identified fears such as “an EU breakup, a bond crash and a Republican winning the White House as the most commonly cited tail risks,” BofA said in a press release.
Stocks also got a boost from a stabilization in the U.S. dollar, which was down 0.24% after rising to hits highest level since March in recent sessions. A weaker dollar boosts profits of U.S. companies abroad as it makes their products cheaper and more competitive.
Also giving stocks a lift was a dip in the yield on the 10-year Treasury note. In Tuesday trading the yield, which moves in the opposite direction, fell to 1.746%, after briefly climbing above 1.8% Monday, its highest level since early June.
Wall Street is also closely watching inflation around the world. Earlier today, inflation readings in Britain and New Zealand both came in stronger than expected. And the latest reading on U.S. inflation saw consumer prices rise 0.3% in September and up 1.5% the past year.
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Stocks rose in foreign markets. The Stoxx Europe 600 index was up 1.5% and stocks in Germany and France were up about 1.2%. Asian shares also rose, with Japan’s Nikkei 225 up 0.4% and stocks up even more in Hong Kong and mainland China, whose benchmark stock indexes rose 1.6% and 1.4%, respectively.