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Stocks return to records following strong earnings

New York Stock Exchange
A trader at the New York Stock Exchange.
(Richard Drew / Associated Press)

U.S. stocks pushed to record heights Friday following strong profit reports from Google’s parent company, Twitter and other big corporations.

Companies are nearly midway through earnings reporting season, and results have generally been better than the dismal expectations that analysts had coming into it. A government report on Friday also showed that U.S. economic growth slowed in the spring, but it was still better than economists expected.

The S&P 500 index rose 22.19 points, or 0.7%, to close at 3,025.86 and pass its prior record, set on Wednesday. The Dow Jones industrial average gained 51.47, or 0.2%, to 27,192.45, and the Nasdaq composite also set a record after jumping 91.67 points, or 1.1%, to 8,330.21.

Friday’s report on the U.S. economy showed that consumer spending remains strong, and employers continue to add jobs every month. But businesses are hesitant to invest, and manufacturing worldwide has slowed amid President Trump’s trade war. Inflation also remains low.

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Investors think there’s virtually 100% certainty that the Federal Reserve will cut its benchmark short-term rate on Wednesday, likely by a quarter of a percentage point from its current range of 2.25% to 2.50%.

“Any time you hit a record high, you ask: Is this justified?” said David Joy, chief market strategist at Ameriprise. “Well, it’s justified based on the easing cycle that central banks are on, and the absolute level of earnings helps. But growth is sluggish and moderating, earnings are flattish and we’ve got this overhang of, let’s call it geopolitical uncertainty. We say, ‘Let’s be a little cautious here.’”

So far this earnings season, about 44% of companies in the S&P 500 have already reported earnings, and their earnings per share have been up a little more than 1% from year-ago levels.

Alphabet, Google’s parent company, soared to one of the biggest gains in the S&P 500 on Friday after it joined the list of companies reporting stronger-than-expected profits. It also allayed investors’ concerns about advertising trends after reporting stronger revenue growth than Wall Street forecast. Alphabet shares surged 9.6% for their best day in four years.

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Twitter jumped 8.9% after it reported stronger user numbers and revenue for the second quarter than investors expected. The big gains for Alphabet and Twitter meant stocks in the communications sector were the best performers in the S&P 500, up 3.2%.

Sprint and T-Mobile US also jumped after the Justice Department approved their merger, despite fears that the deal could bring higher prices and less competition for customers. Sprint rose 7.4%, and T-Mobile US gained 5.4%.

Treasury yields held relatively steady. The 10-year Treasury yield remained at 2.07%. The two-year yield, which is more influenced by the Fed’s movements, rose to 1.86% from 1.84% late Thursday.

Benchmark U.S. oil rose 18 cents, settling at $56.20 a barrel. Brent crude, the international standard, rose 7 cents, to $63.46 a barrel.

Gold rose $4.60, to $1,418.50 per ounce; silver fell 1 cent, to $16.33 per ounce; and copper fell 2 cents, to $2.68 per pound.

The dollar fell to 108.71 Japanese yen from 108.73 yen on Thursday. The euro strengthened to $1.1126 from $1.1144.


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