By Michael Wursthorn and Georgi Kantchev
The Dow Jones Industrial Average surged Tuesday to notch its
best day since September.
Better-than-expected earnings results from Caterpillar and 3M,
among others, helped support major indexes after stocks had fallen
Monday. Strong results from U.S. companies, as well as solid
economic growth around the world, have underpinned stock markets
and helped push them to record highs over the past year.
Roughly a quarter of the companies in the S&P 500 have
reported so far this earnings season as of Tuesday's close, with
this week slated to be one the busiest, according to FactSet. By
the end of Friday, more than half of the major index's companies
will have reported results for the most recent quarter, FactSet
says.
"We continue to see a strong improvement in earnings," said
Celia Dallas, chief investment strategist at Cambridge Associates.
While valuations are still a concern, Ms. Dallas cautioned that
investors shouldn't limit their exposure to U.S. stocks too much
yet. "U.S. equities tend to be more defensive when you get into
periods of stress," relative to stocks elsewhere in the world, she
said.
The Dow industrials gained 167.80 points, or 0.7%, to 23441.76
-- its 54th record of the year and largest one-day point and
percentage gain since Sept. 11. The S&P 500 rose 4.15 points,
or 0.2%, to 2569.13, while the Nasdaq Composite added 11.60 points,
or 0.2%, to 6598.43.
Shares of 3M jumped $13.10, or 5.9%, to $234.65 after the maker
of Post-it Notes, Ace bandages and Scotch-Brite cleaning pads
reported higher profit and revenue that exceeded analysts'
expectations, while also raising its outlook. It was 3M's biggest
single-day percentage gain since 2009. The stock was the best
performer in the Dow industrials and the second best in the S&P
500 for the day.
Caterpillar, meanwhile, gained 6.56, or 5%, to 138.24 after the
company posted stronger-than-expected revenue and profit growth and
boosted its outlook for the year.
Together, the two companies contributed roughly 135 points to
the Dow industrials on Tuesday.
Boeing, a major contributor to the Dow's gains this year, is
expected to report results Wednesday morning. Shares of the
aerospace giant rose 3.68, or 1.4%, to 266.00 on Tuesday and are up
about 71% for the year.
Money managers welcomed the day's gains in U.S. stocks. But Eric
Schoenstein, portfolio manager of the $6 billion Jensen Quality
Growth Fund, said he has concerns around whether stock jumps driven
by earnings can be sustained amid lofty valuations and a
long-running rally.
"It could be a situation where the price is getting a little bit
ahead of what the opportunity might be," Mr. Schoenstein said,
adding that his investment committee will discuss holdings such as
3M on Wednesday morning.
Central banks are another focus for investors this week. The
European Central Bank is expected to announce changes to its
massive bond-buying program after its meeting Thursday. Economists
expect the ECB to reduce its monthly asset purchases, but also to
extend the program for a number of months into 2018.
Investors "need to exercise caution as markets enter a different
phase with less central bank support than has been the case over
the past decade," said David Simner, portfolio manager at Fidelity
International.
U.S. President Donald Trump is also expected to unveil his pick
for the new leader of the Federal Reserve within the next 10 days
from a roster of candidates that include current Fed Chairwoman
Janet Yellen.
On Monday, Mr. Trump said he was "very, very close" to a
decision, and on Tuesday he asked Republican senators in a
show-of-hands poll which candidate they preferred, Fed governor
Jerome Powell or Stanford University economics professor John
Taylor.
A hawkish candidate might send U.S. Treasury yields higher and
boost the dollar, analysts say. The yield on the 10-year U.S.
Treasury note rose to 2.406% from 2.375% Monday. Yields rise as
prices fall.
In currencies, the WSJ Dollar Index, which tracks the dollar
against a basket of 16 currencies, was up 0.2%.
Elsewhere, the Stoxx Europe 600 index fell 0.4% after
lower-than-expected economic numbers.
IHS Markit said Tuesday its composite Purchasing Managers Index
for the eurozone -- based on survey responses from manufacturers
and service providers -- fell to 55.9 in October from 56.7 in
September. The index still points to solid growth, with a reading
above 50 signaling an expansion in activity.
The Shanghai Composite Index finished up 0.2%. Japan's Nikkei
Stock Average extended its record-setting streak of daily gains to
16 by closing up 0.5%.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and
Georgi Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
October 24, 2017 17:22 ET (21:22 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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