Wall Street ended higher on Tuesday as a spate of solid corporate earnings and upbeat forecasts stoked investor risk appetite and sparked a broad rally. All three major U.S. stock indexes advanced, with interest rate sensitive megacaps providing much of the upside lift as benchmark Treasury yields held steady, comfortably below their recent spike to 5%.
The S&P/TSX Composite Index ended lower, however, as declines in heavyweight financials and energy sectors weighed on the Canadian benchmark. It closed below the 19,000 threshold for the first time in a year, as investors awaited a Bank of Canada interest rate decision.
Third quarter earnings season has shifted into high gear, and this week nearly a third of the companies in the S&P 500 are expected to post results.
“The earnings season is only now just getting into full swing with a third of the companies reporting this week,” said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta. “Prior to Monday and Tuesday, the earnings reports were a bit on the disappointing side, and so this was the first couple of days we’ve had some more upbeat and better earnings.”
Indeed, of the 118 S&P 500 companies that have reported so far, 81% have beaten analysts’ expectations, according to LSEG.
The Dow Jones Industrial Average rose 204.97 points, or 0.62%, to 33,141.38, the S&P 500 gained 30.64 points, or 0.73%, to 4,247.68 and the Nasdaq Composite added 121.55 points, or 0.93%, to 13,139.88.
Of the 11 major sectors in the S&P 500, utilities enjoyed the largest gain, while energy was the sole loser, weighed down by softening crude prices.
Verizon surged 9.3% after raising its annual free cash flow forecast, while General Electric rose 6.5% after the conglomerate lifted its full-year profit forecast.
Coca-Cola hiked its annual sales outlook, sending its stock up 2.9%, while 3M rose 5.3% on the heels of its upbeat quarterly report.
Aerospace firm RTX jumped 7.2% after its results topped expectations.
On the economics front, business activity in the U.S. has ticked higher this month, according to S&P Global’s advance “flash” purchasing managers’ indexes (PMI).
Calling the PMI a “goldilocks” report, Martin said it was “generally a good report” with prices moderating and “okay” employment.
On Thursday, the U.S. Commerce Department is due to release its first take on third quarter GDP, which is seen showing a robust acceleration to 4.3% from 2.1% in the second quarter.
On Friday, the Commerce Department is expected to follow with its closely watched Personal Consumption Expenditures (PCE) report, which analysts expect will provide further evidence that inflation is slowly cooling down toward the Federal Reserve’s average annual 2% target rate.
Shares of Microsoft Corp posted after hour gains after beating quarterly revenue estimates, while Alphabet Inc lost ground after the bell following its revenue beat.
The TSX closed at 18,986.49, down 60.25 points or 0.32%, its fifth straight day of declines.
Energy shares fell 1.4% as oil settled more than 2% lower at US$83.74 a barrel after weak European economic data dented prospects for energy demand.
Financials, the TSX’s most heavily-weighted sector, fell 0.8%, industrials lost 0.9% and the materials group, which includes precious and base metals miners and fertilizer companies, was down 0.3%.
Shares of Teck Resources sank 8.9% as the company said it was progressing “expeditiously” on a split of its coal and copper businesses and reported quarterly profit that missed analysts’ estimates.
In Tuesday’s post market, Canadian National Railway reported quarterly results, with adjusted earnings per share coming in slightly below the Street consensus. U.S.-listed shares were up 1.2% in after-hours trading.
Analysts expect the BoC will leave its policy rate on hold at 5.0% on Wednesday, though with inflation hovering well above its 2% target, many see the central bank indicating future hikes are still possible.
Reuters, Globe staff