U.S. stocks rallied on Tuesday, with major indexes closing at the highest levels in about a month as the latest round of corporate earnings supported the thesis that valuations are supported by economic activity.
The day’s gains were broad, with all 11 S&P 500 sectors ending in solidly higher territory, although the technology and consumer-discretionary groups saw the biggest advance on the day.
What are the main benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.87% rose 213.59 points, or 0.9%, to 24,786.63. The blue-chip gauge closed at its highest level since March 16 and ended in positive territory for the year for the first time since March 20.
The S&P 500 index SPX, +1.07% added 28.55 points, or 1.1%, to 2,706.39. The Nasdaq Composite Index COMP, +1.74% gained 124.81 points, or 1.7%, to 7,281.10. Both the S&P and the Nasdaq closed at their highest level since March 21.
All three also ended back above their 50-day moving averages, a closely watched gauge for the short-term price momentum in a security. Ending above this level can signal a change in investor sentiment. The Dow hadn’t closed above its 50-day since March 9, while the S&P hadn’t since March 16 and the Nasdaq hadn’t breached that mark since March 21.
Meanwhile, the Cboe Volatility Index VIX, -7.91% marked an intraday low of 14.57, down 12%, marking lowest intraday level since March 9. The gauge, which reflects bullish and bearish options contracts on the S&P 500 in the coming 30 days, tends to move in the opposite direction of stocks.
What’s driving markets
An upbeat attitude toward first-quarter earnings remained a driving factor for stocks. S&P 500-listed companies are expected to see earnings growth of 17.3% for the period, the fastest rate since 2011, although much of that can be attributed to the recently passed tax bill.
Better-than-expected data on housing and industrial production as well as growth numbers from China provided a benign economic background for Tuesday’s trading session.
China reported forecast-beating first-quarter economic growth of 6.8% on Tuesday. That growth was lifted by surprisingly strong exports, suggesting U.S. trade tensions have yet to make an impact.
Meanwhile, a lack of escalation in the trade tensions between China and the U.S. has also emboldened investors.
Which stocks are in focus?
Netflix Inc. NFLX, +9.19% shot up 9.2% and closed at a record a day after the streaming-media company reported first-quarter results that blew past Wall Street forecasts. The stock was the biggest percentage gainer in the S&P, and it supported the overall consumer-discretionary sector.
UnitedHealth Group UNH, +3.57% rose 3.6% after it raised its outlook and reported a sharp increase in profits. The stock was one of the biggest boosts among Dow components.
General Electric Co. GE, +3.45% jumped 3.5%. The troubled industrial conglomerate is scheduled to report results later this week.
On the downside, Johnson & Johnson JNJ, -0.93% slid 0.9% lower even as profit and revenue beat forecasts and the pharmaceutical and consumer products group lifted its sales outlook. Goldman Sachs GS, -1.65% fell 1.7% despite reporting results that were sharply ahead of expectations.
Shares of Southwest Airlines Co. LUV, -1.13% fell 1.1% as a passenger was killed on a flight after an engine explosion forced an emergency landing in a Philadelphia airport.
Tesla Inc. TSLA, -1.21% fell 1.2% after the electric-car maker confirmed it has halted production of its Model 3 auto for a second time.
Technology companies rallied on Tuesday. Twitter Inc. TWTR, +11.41% shares surged 11% after Morgan Stanley analysts upgraded the stock to equal-weight from underweight. Shares of Alphabet Inc. GOOG, +3.49% gained 3.2% while Microsoft Corp. MSFT, +2.02% rose 2% and Apple Inc. AAPL, +1.38% added 1.4%.
What are strategists saying?
“Even though we this quarter had been marked by considerably high expectations, both earnings and revenue are coming in ahead of expectations. This is just what the doctor ordered to divert our attention from the uncertainty of geopolitical issues,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“Even though banks haven’t been treated kindly, I think names like Goldman have had very encouraging things to say, while Netflix fulfilled its growth expectations. No wonder investors can’t get enough of it.”
What economic data were in focus?
Housing starts ran at a seasonally adjusted annual pace of 1.32 million in March, up 2%, compared with February, the Commerce Department said Tuesday.
Separately, industrial production in March rose 0.5%, slightly above forecast of a 0.4% gain.
What are other markets doing?
Asian markets had a mostly weaker session, led by Taiwan’s Taiex Y9999, +0.35% European stocks SXXP, +0.80% were mostly higher. The FTSE 100 index UKX, +0.39% also turned higher after the pound GBPUSD, +0.1260% lost ground against the dollar.
Gold futures GCM8, -0.17% GCM8, -0.17% were off 0.1%, and the ICE U.S. Dollar Index DXY, +0.04% DXY, +0.04% inched 0.1% higher. May West Texas Intermediate crude CLK8, +0.99% rose 0.3%
