Stocks edge up, lifted by corporate earnings and falling Treasury yields
U.S. stock indexes inched further into record territory Wednesday after AT&T, Boeing and others joined the parade of big companies reporting stronger profits than analysts expected. Stocks that pay big dividends were particularly strong after the Federal Reserve took a pause in its slow-moving campaign to lift interest rates. Treasury yields sank lower.
The Standard & Poor’s 500 index edged up 0.70 of a point, or less than 0.1%, to 2,477.83 and added a whisper to the record high it set Tuesday.
The Dow Jones industrial average climbed 97.58 points, or 0.5%, to 21,711.01. The Nasdaq composite rose 10.57 points, or 0.2%, to 6,422.75. Both are at record highs. The Russell 2000 index of smaller-company stocks fell 8.11 points, or 0.6%, to 1,442.28, and the New York Stock Exchange was nearly evenly split between stocks that rose and those that fell.
While announcing its decision to hold short-term rates steady, the Federal Reserve said that it may begin paring the massive $4.5-trillion balance sheet it built up after the financial crisis “relatively soon,” which some analysts took to mean September. The Fed also said that in the near term, inflation looks to remain below its target of 2%.
After the Fed’s announcement, drops in Treasury yields accelerated. The 10-year yield fell to 2.29% from late Tuesday’s 2.33%. The two-year yield sank to 1.35% from 1.39%.
Lower bond yields make the dividends paid by stocks more attractive, and the biggest dividend payers picked up momentum after the Fed’s announcement. Utilities stocks in the S&P 500 climbed 0.9%, for example, more than doubling their gain after the Fed’s decision.
The best-performing area of the market was the telecom sector, which jumped after AT&T reported stronger second-quarter earnings than Wall Street had forecast. AT&T shares climbed 5% to $38.03.
Boeing, the top-performing stock, jumped 9.9% to $233.45 — its best day in more than eight years — after it raised its forecast for full-year earnings and reported better-than-expected second-quarter earnings.
AT&T and Boeing were only the latest companies to report healthier profits than expected for the April-through-June quarter.
“We’ve seen some pretty strong results from important companies,” said John Wilson, senior equity portfolio manager at Columbia Threadneedle. “They’re delivering very strong revenue and profit growth. That’s encouraging, especially given the fact that markets have had a pretty good move.”
The S&P 500 is up nearly 11% for the year on the expectation that corporate profits will continue to rise, and the stronger profits help validate the big gains. Wilson said he has noticed some particularly encouraging comments from companies about improvements they’ve seen in their European businesses.
Akamai Technologies had the sharpest drop in the S&P 500, sinking 14.6% to $45.49, despite reporting better-than-expected quarterly results. The provider of online cloud services gave a forecast for third-quarter revenue and other measures that were lower than analysts expected.
Healthcare stocks moved lower as several profit reports or forecasts disappointed investors. Hospital operator Universal Health Services dropped 8.2% to $112.88 after it cut its outlook following a weak second quarter.
Roomba maker IRobot soared 21.2% to $106.49 after it posted a profit, raised its forecast and agreed to buy its biggest European distributor.
Advanced Micro Devices rose 4.6% to $14.76 after the chipmaker reported strong quarterly results and raised its revenue forecast.
In overseas markets, Japan’s benchmark Nikkei 225 index climbed 0.5%, South Korea’s Kospi index slipped 0.2% and Hong Kong’s Hang Seng index added 0.3%. France’s CAC 40 rose 0.6%. The FTSE 100 in London gained 0.2%. Germany’s DAX rose 0.3%.
Benchmark U.S. crude topped $48 a barrel for the first time in seven weeks. It climbed 86 cents, or 1.8%, to $48.75 a barrel. Brent crude, the international standard, rose 77 cents to $50.97 a barrel.
Natural gas fell 2 cents to $2.92 per 1,000 cubic feet. Wholesale gasoline rose 2 cents to $1.62 a gallon. Heating oil rose 3 cents to $1.60 a gallon.
Gold fell $2.70 to $1,249.40 an ounce. Silver fell 8 cents to $16.46 an ounce. Copper gained 3 cents to $2.87 a pound.
The dollar slipped to 111.35 yen from 111.89 yen. The euro rose to $1.1725 from $1.1652, and the British pound rose to $1.3100 from $1.3037.
UPDATES:
3 p.m.: This article was updated with closing prices, context and analyst comment.
8:20 a.m.: This article was updated with market prices and context.
This article was originally published at 7 a.m.
