Earnings Give US Stocks a Boost – Wall Street Journal

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  • U.S. stock indexes rise
  • Asian tech under pressure following ZTE action
  • Stoxx Europe climbs

U.S. stocks rose Tuesday, driven by strong corporate results, sending the Dow industrials back into positive territory for 2018.

The gains extended Monday’s rally and put major indexes on track for their eight day of gains in the past 11 trading sessions. Trading volumes, however, have been light, suggesting some investors are remaining on the sidelines as geopolitical tensions simmer.

The Dow Jones Industrial Average climbed 264 points, or 1.1%, to 24837. The S&P 500 added 1%, and the tech-heavy Nasdaq rose 1.4%.

Helping boost sentiment, Netflix shares jumped 7.9% after reporting subscriber growth that beat its own forecast. The stock is by far the best performer in the S&P 500 this year, up 73%.

“The FANGs [Facebook, Amazon.com, Netflix and Google ‘s parent Alphabet] are very important; they seem to be a barometer for all stocks,” said Christopher Peel, chief investment officer at Tavistock Investments. In light of recent pressure on technology companies, “the tech sector is vulnerable to a selloff if any of the big five or six companies have a miss [on earnings],” he said. Shares of the FANG stocks each gained at least 1%.

Results from Netflix are also the first real gauge of whether world-wide demand picked up in the first quarter, said

JJ Kinahan,

chief market strategist at TD Ameritrade. “You really want to hear that tech stocks are doing well, and seeing demand and growth world-wide,” he said.

Traders on the floor of the New York Stock Exchange on Monday.


Photo:

Michael Nagle/Bloomberg News

Among other companies posting results, Goldman Sachs shares fell 1.3% even after the company reported higher profit and revenue than expected, while UnitedHealth Group rose 3.3% after the biggest U.S. insurer reported a 31% increase in earnings and lifted its earnings outlook for the year.

International Business Machines Corp. and United Continental Holdings are scheduled to report after the market closes, while Morgan Stanley will conclude earnings season for big U.S. banks when it reports Wednesday morning.

Dan Morgan, senior portfolio manager at Synovus Trust Company, said it is time for the market to focus on the fundamentals as opposed to negative possibilities like effects from tariffs or legislation against Facebook.

“You’re just starting to see the beginning” of a solid first quarter, he said.

Still, many analysts expect the wider first-quarter earnings season to offer only a limited boost to the equity market, in light of high expectations and continued uncertainty about trade and tensions around Russia and Syria.

“The early take is things are good…but there’s a lot of nervousness going forward because the geopolitical scene is a constantly changing one,” said Mr.

Kinahan.

Elsewhere, the Stoxx Europe 600 added 1%, and the multinational-heavy FTSE 100 edged up 0.5% after grappling with a strengthening British pound to start the week. A stronger U.K. currency typically means corporate earnings generated overseas are worth less translated back into pounds.

Sterling was last down 0.2% after settling Monday at its highest afternoon level against the dollar since the U.K. referendum in June 2016.

While European shares have struggled with a stronger euro and British pound this year, U.S. companies benefited in the first quarter from a weaker dollar. Of the S&P 500 companies that reported results through Monday, 60% discussed a positive impact from foreign-exchanges rates, according to FactSet.

And Chinese technology shares fell sharply after the U.S. and U.K. warned against Chinese telecom-equipment heavyweight ZTE. The U.S. Commerce Department banned American companies from selling products to ZTE, saying the company violated the terms of a deal last year settling allegations of sanctions busting involving North Korea and Iran.

Hong Kong’s Hang Seng Index gave up early gains to fall 0.8%, while the Shanghai Composite Index closed down 1.4% at its lowest level since May 2017.

Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at ese.erheriene@wsj.com