U.S. stocks rallied Tuesday as retailers, technology firms and household goods companies made solid gains and helped the market shake off a weak start. Netflix slumped after investors were disappointed with the streaming video company’s subscriber growth.
Stocks skidded at the start of trading as investors sold some of their recent favorites, including Facebook and Apple. But those stocks later recovered and Netflix narrowed its losses. Tech firms also turned higher, and strong results from Johnson & Johnson pulled healthcare stocks upward.
Federal Reserve Chairman Jerome Powell delivered a positive view of the economy as he told Congress that he expects the Fed to keep gradually raising interest rates. Powell said the Fed believes the economy will stay strong and inflation will remain around 2% for the next few years. Stocks have fallen previous times that Powell gave major addresses, but they didn’t Tuesday.
Investors focused on company earnings, which aside from Netflix’s were mostly good. Financial services company Charles Schwab and regional bank Comerica both rose.
“Double-digit earnings growth for this quarter and this full calendar year remains on track, and a 10% gain in earnings next year is also still doable,” said Sam Stovall, chief investment strategist for CFRA.
Investors have been buying U.S. stocks and selling foreign indexes this year, but Stovall said earnings growth for companies in overseas markets will probably improve in 2019 while U.S. profit growth slows. That could make non-U.S. markets more appealing.
The Standard & Poor’s 500 index rose 11.12 points, or 0.4%, to 2,809.55. The Dow Jones industrial average rose 55.53 points, or 0.2%, to 25,119.89. The Nasdaq composite climbed 49.40 points, or 0.6%, to 7,855.12, topping the record it set last week. The Russell 2000 index of smaller-company stocks rose 8.72 points, or 0.5%, to 1,687.26.
Companies that sell clothing, food and household goods made solid gains. Ralph Lauren advanced 2.6% to $133.30, and PepsiCo climbed 1.7% to $114.88. Amazon rose 1.2% to $1,843.93 after it said sales in the first hours of its annual Prime Day promotion improved compared with last year despite website problems.
Netflix’s weak subscriber growth sent the stock down 5.2% to $379.48. The company has regularly beaten its own subscriber forecasts, but it didn’t in the second quarter, and its third-quarter estimate was lower than analysts expected. Things looked far worse for Netflix in early trading — the stock plunged 14.1% before recovering most of that drop. Even with Tuesday’s loss, the stock is up 98% this year.
Johnson & Johnson’s second-quarter profit grew thanks to better results from its prescription drug business, and it posted higher sales than analysts expected. The stock gained 3.5% to $129.11.
Financial services company Charles Schwab climbed 3.6% to $52.88 after its quarterly results surpassed Wall Street forecasts.
UnitedHealth, the largest U.S. health insurance company, once again beat expectations in the latest quarter and raised its annual profit forecast. But the company’s spending on medical costs was higher than analysts expected, and the stock fell 2.6% to $250.29. Investors worried that other health insurers would have similar problems, and shares of competitors Anthem and Humana slipped.
Advertising companies sank after Omnicom said its business in North America decreased in the second quarter and its business in Britain also shrank. Its shares sank 9.5% to $70.69. Interpublic Group slid 6.1% to $22.26.
The European Union and Japan signed a broad trade deal Tuesday that will eliminate nearly all tariffs across a third of the global economy. Japanese consumers will pay lower prices for European wine and pork, while Japanese machinery parts, tea and fish will get cheaper for Europe. The deal has been in the works for years and contrasts with the more protectionist approach of President Trump.
Bond prices were little changed. The yield on the 10-year Treasury note remained at 2.86%.
Benchmark U.S. crude erased an early loss and finished little changed at $68.08 a barrel in New York. Brent crude, used to price international oils, ticked up 0.4% to $72.16 a barrel in London.
Wholesale gasoline rose 1.2% to $2.03 a gallon. Heating oil rose 0.8% to $2.07 a gallon. Natural gas fell 0.7% to $2.74 per 1,000 cubic feet.
Metals prices continued to fall. Gold slid 1% to $1,227.30 an ounce. Silver sank 1.2% to $15.62 an ounce. Copper fell 0.6% to $2.75 a pound. All three are near their lowest prices in a year.
The dollar rose to 112.83 yen from 112.30 yen. The euro fell to $1.1664 from $1.1714.
Germany’s DAX jumped 0.8%. The CAC 40 in France rose 0.2%. The British FTSE 100 index gained 0.3%.
Japan’s benchmark Nikkei 225 gained 0.4%. South Korea’s Kospi lost 0.2%, and Hong Kong’s Hang Seng shed 1.3%.
3:40 p.m.: This article was updated with closing prices, context and analyst comment.
This article was originally published at 7:35 a.m.