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Stocks close higher; Line shares soar and JPMorgan earnings top expectations

Wall Street
Wall Street in New York City.
(Richard Drew / Associated Press)

Solid earnings reports Thursday drove the stock market to another record high.

Stocks rose from the start of trading after JPMorgan Chase released results that were better than analysts expected. Companies are expected to report earnings dropped again in the April-through-June period, but a few big ones that have released numbers have beaten low expectations, encouraging investors.

The gains were broad, with nine of the 10 industry sectors of the Standard & Poor’s 500 index showing gains. Banks rose the most: 0.9%.

“It’s really early in earnings season, but so far so good,” said Brad Sorensen, director of the Schwab Center for Financial Research. “Optimism is starting to creep into the market.”

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Investors pulled money out of conservative assets such as gold and Treasury bonds, sending bond yields sharply higher. They also sold shares of utility companies, considered a haven because of their steady and relatively safe dividends.

The Dow Jones industrial average rose 134.29 points, or 0.7%, to 18,506.41. The S&P 500 advanced 11.32 points, or 0.5%, to 2,163.75. The Nasdaq composite climbed 28.33 points, or 0.6%, to 5,034.06.

The Dow and S&P 500 remain at record highs. The Nasdaq is barely positive for the year.

The U.S. gains followed rallies in Germany, France and Japan, with stock indexes in each of those countries rising more than 1%.

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British stocks initially rose, then gave up the gains after the Bank of England surprised investors by holding off on cutting interest rates despite the hit to the British economy from last month’s vote to leave the European Union. The British pound soared on the news.

U.S. stocks have been on a rocky ride since the start of the year. They fell sharply in January and early February on fears that a slowdown in Chinese economic growth would drag the rest of the world into recession, then rose again, then fell after the shock of Britain’s vote.

But a strong U.S. jobs report Friday, hopes that Japan’s ruling party will flood its market with even more money and signs of political stability in Britain as its new prime minister takes over have lifted investor spirits.

Brad McMillan, chief investment officer at the Commonwealth Financial Network, said the recent scares may have flushed out sellers, setting up the market for even bigger gains.

“Anyone inclined to sell did so” earlier, he said, “and now the market is dominated by buyers.”

Still, McMillan is worried that prices may have gotten ahead of fundamentals.

Corporate earnings are the biggest driver of stock prices, and they’re looking weak overall, notwithstanding Thursday’s batch of solid reports. Per-share earnings in the S&P 500 are expected to fall 5.5% from the year-earlier period, the fourth quarter in a row of drops, according to S&P Global Market Intelligence.

Among companies making big moves Thursday, Japanese messaging app Line surged 27% to $41.58 on its first day of trading. In Japan, Line has more users than Facebook or Twitter.

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KFC owner Yum Brands climbed 3% to $88.27 after reporting better-than-expected profit late Wednesday.

Delta Air Lines rose 3.6% to $40.98 after reporting a second-quarter profit that beat expectations. Lower fuel prices have helped airlines post big profits.

JPMorgan Chase rose 1.5% to $64.12. It topped profit forecasts, and investors were encouraged by strong trading revenue for the quarter. Citigroup and Wells Fargo will report results Friday.

In Europe, Germany’s DAX was up 1.4% and France’s CAC-40 rose 1.2%. Britain’s FTSE 100 slid 0.2%.

In Japan, the Nikkei closed up nearly 1% as the yen weakened against the dollar. Hong Kong’s Hang Seng index rose 1.1%.

Prices of U.S. government bonds fell, pushing the yield on the 10-year Treasury note to 1.53% from 1.48%.

The British pound rose to $1.3330 from $1.3160. The euro rose to $1.1123 from $1.1114. The dollar rose to 105.43 yen from 104.33 yen.

Benchmark U.S. crude rose 93 cents to $45.68 a barrel in New York. Brent crude, a standard for international oil prices, rose $1.11 to $47.37 a barrel in London.

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In other energy trading in New York, wholesale gasoline rose 4 cents to $1.41 a gallon, heating oil rose 3 cents to $1.41 a gallon and natural gas slipped a penny to $2.73 per 1,000 cubic feet.

Gold fell $11.40 to $1,332.20 an ounce, silver fell 9 cents to $20.32 an ounce and copper was flat at $2.24 a pound.


UPDATES:

3:04 p.m: This article was updated with additional details.

1:18 p.m.: This article was updated with closing prices. 

This article was originally published at 6:59 a.m.


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