Earnings power rise in market
NEW YORK — Solid earnings from a broad swath of companies pushed the stock market higher on Tuesday.
Ameriprise Financial, a wealth management company, surged as it posted earnings that exceeded Wall Street's expectations. The company said it would buy back $2.5 billion of its stock and raise its dividend.
Cummins, a maker of large diesel engines, jumped as the company said a surge in North American sales sent its earnings higher.
Just over half the companies in the Standard & Poor's 500 index have released their earnings for the first quarter and, with the occasional exception, the reports have contained enough good news to drive stock prices higher. The S&P 500 has gained 2.1 percent since April 14, and the index is approaching its all-time high from a pullback at the start of the month prompted by a sell-off in formerly high-flying Internet and biotechnology stocks.
“Corporate earnings are pretty good,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research. “Once the market got back on its feet after that dip that we had, it seems to be poised to hit a new record high very soon.”
The Standard & Poor's 500 index rose 8.90 points, or 0.5 percent, to 1,878.33. The index is 12 points below its record high of 1,890.89 set April 2.
The Dow Jones industrial average climbed 86.63 points, or 0.5 percent, to 16,535.37. The Nasdaq composite gained 29.14 points, or 0.7 percent, to 4,103.54.
Analysts expect earnings for S&P 500 companies to grow by 1.4 percent in the first quarter, according to data from S&P Capital IQ. Although that is lower than the 5.2 percent earnings growth recorded in the same period a year ago, expectations for the period were low after an unusually harsh winter.
Two weeks ago, analysts were expecting an overall decline in earnings, but those expectations have risen as more companies have reported earnings.
“Companies have learned a new religion,” said Chris Bertelsen, chief investment officer at Global Financial Private Capital, a wealth management company. “That is, underpromise and overdeliver.”
Ameriprise rose $6.04, or 5.8 percent, to $109.55. Financial stocks rose almost 1 percent, the biggest gain of the 10 industry groups that make up the S&P 500.
Cummins rose $5.61, or 3.9 percent, to $150.81 after the company posted its results and raised its sales outlook due to improving demand in North America.
Coach, a maker of handbags and other luxury goods, was among the day's losers. The company's stock fell $4.71, or 9.3 percent, to $45.71 after Coach said its earnings declined in the first three months of the year. Sales in North America came under pressure from competitors including Michael Kors.
Investors will get more information on the economy and the Federal Reserve's thinking on Wednesday.
The Commerce Department will issue the first of three estimates of how fast the economy grew in the January-March quarter. Economists say a slowdown last quarter, caused mainly by a severe winter, is likely giving way to stronger growth that should endure through the rest of the year.
The Fed will release a statement upon the conclusion of its two-day meeting. Most economists expect that the Fed will reduce its monthly bond purchases by $10 billion, to $45 billion a month. The Fed's stimulus has helped underpin a five-year rally in stocks.
The yield on the 10-year Treasury note was unchanged from Monday at 2.70 percent. The price of oil rose 44 cents, or 0.4 percent, to $101.28 a barrel.