UnitedHealth jumps 8% to lead Dow, S&P 500 gainers
U.S. stocks finished at more-than-three-week highs Tuesday, as investors cheered a raft of largely upbeat corporate earnings reports, while considering the implications of a partial U.S.-China trade deal announced last Friday and the possibility of a breakthrough in Brexit negotiations.
How did major benchmarks perform?
The Dow Jones Industrial Average DJIA, +0.89% rose 237.44 points, or 0.9%, to end at 27,024.80, while the S&P 500 index SPX, +1.00% gained 29.53 points, or 1%, to finish at 2,995.68. The Nasdaq Composite Index COMP, +1.24% advanced 100.06 points, or 1.2%, to close at 8,148.71.
The gains saw the Dow and S&P 500 turn higher for the month, with the blue-chip gauge up 0.4% since the end of September and the S&P up 0.6% over the same stretch. The Nadaq added to its month-to-date gain, up 1.9%.
The S&P 500 ended about 1% below its record close of 3,025.86 set on July 26, while the Dow Jones Industrial Average closed around 1.2% below its record finish of 27,359.16 set on July 15, and the Nasdaq Composite finished around 2.3% away from its record close of 8,330.21 scored on July 26.
What’s driving the market?
The third-quarter U.S. corporate earnings reporting season kicked off Tuesday with results from the nation’s largest banks, reflecting a relatively healthy U.S. consumer and a more wary business sector.
Shares of JPMorgan Chase & Co. JPM, +3.01% rose 3% after reporting revenue and earnings that rose more than expected on the back of its consumer banking division, while Wells Fargo & Co. WFC, +1.70% was also up after it reported a surprise increase in revenue, though its third-quarter profits fell more than expected.
Citigroup Inc. C, +1.40% shares gained 1.4% after reporting quarterly sales and profits that beat expectations, while Goldman Sachs Group Inc. GS, +0.31% GS, +0.31% reported a steep 26% decline in profit from the year ago period, reflecting weakness in the mergers and acquisitions market and debt and equity underwriting. Goldman shares rose 0.3%.
UnitedHealth Group Inc. UNH, +8.16% provided Tuesday’s most impressive earnings release, after earnings and revenue came in above expectations and after the health-care services company raised its full-year outlook. Shares rallied 8.2%, pacing gains for the Dow and S&P 500.
“First the fears with China have been alleviated, now it looks like Brexit negotiations are all but signed, sealed and delivered,” MUFG chief economist Chris Rupkey said. “One by one the major global risks to U.S. economic growth are falling by the wayside which gives investors the green light to back up the truck and buy lots of stocks.”
However, S&P 500 corporate earnings are expected to fall 4.6% in the third quarter, according to FactSet. This would be the first time that index company earnings have fallen for three straight quarters since the fourth of quarter of 2015 through the second quarter 2016, according to FactSet analyst John Butters. However, corporate buybacks are again seen supporting earnings per share.
“Corporate America is unlikely to deliver much, if any, earnings growth in the third quarter,” said John Lynch, chief investment strategist at LPL Financial. “However, we think better days lie ahead. We expect progress on trade to keep U.S. economic growth at or above the trend for the current economic expansion. The U.S.-China trade conflict is unlikely to be resolved anytime soon, but we believe any small steps forward could increase business confidence and spark capital investment, lifting corporate profits.”
Enthusiasm over a U.S.-China trade deal boosted stocks at the end of last week, but analysts said a lack of detail around planned tariff increases and other elements damped enthusiasm, leaving stocks to drift lower on Monday.
Speaking with reporters in London, St. Louis Fed President James Bullard said investors might be too optimistic about how long it takes to reach trade deals. Bullard dissented last month from the Federal Reserve’s decision to cut interest rates by a quarter point, calling instead for half-point decrease.
In its World Economic Outlook, published Tuesday, the IMF sees global economic growth falling to 3% this year, the slowest pace since the 2008 financial crisis.
Meanwhile, European stocks on Tuesday rallied on optimism over the possibility of a last minute deal for an agreed Brexit pact. The Stoxx Europe 600 SXXP, -0.25% ended 1.1% higher at 394.02, its best level since May 22, 2018.
Which stocks are in focus?
Dow constituent Johnson & Johnson JNJ, +1.62% reported earnings and revenue that rose more than Wall Street estimates, while the company raised its full-year guidance. Shares rose 1.6%.
Shares of BlackRock Inc. BLK, +2.36% gained 2.4% after reporting a smaller-than-expected fall in profit.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -2.12% rose to 1.754% from 1.748% late Friday. Bond markets were closed Monday for the Columbus Day holiday.
In commodities markets, West Texas Intermediate crude CLX19, -0.23% fell 78 cents, or 1.5%, to $52.81 on the New York Mercantile Exchange as slowing global economic growth contributed to worries about oil demand.
Gold futures declined on Tuesday to post their lowest settlement month to date, as investors awaited clarity on U.S.-China trade talks and as earnings season starts on a positive note.
In Asia overnight, stocks trade mixed with Japan’s Nikkei NIK, +1.20% rising 1.9%, the China CSI 300 000300, -0.34% falling 0.4% and Hong Kong’s Hang Seng Index HSI, +0.61% falling 0.1%.