Profits are climbing for companies, and so are their stock prices.
More big businesses joined the earnings parade Tuesday, saying their profits were even larger in the first three months of the year than analysts were expecting, including Caterpillar and McDonald’s. The encouraging reports pushed U.S. indexes to their second straight day of big gains, placing them either close to or firmly in record territory.
The Standard & Poor’s 500 index rose 14.46 points, or 0.6 percent, to 2,388.61. It’s within a third of a percent of its all-time high, set at the start of March.
The Dow Jones industrial average gained even more due to the big jumps for Caterpillar and McDonald’s, which are among the 30 stocks in the average. The Dow rose 232.23 points, or 1.1 percent, to 20,996.12.
The Nasdaq rose 41.67, or 0.7 percent, to 6,025.49, its first move above 6,000 points. The Russell 2000 of smaller-company stocks was up 13.13 points, or 0.9 percent, at 1,411.08.
“Earnings have come through quite nicely so far,” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust. “They’re beating forecasts, the numbers have been quite good and this is now the second consecutive quarter that’s happened.”
After struggling for years with a slow global economy and weak oil prices, big U.S. businesses are in the midst of reporting their best quarter of profit growth in years, analysts say.
Companies in the S&P 500 are on track to report overall growth of about 10 percent in first-quarter earnings per share, according to S&P Global Market Intelligence. This is a particularly busy week, with more than a third of the companies in the S&P 500 scheduled to unveil their first-quarter results.
Many investors say strong profit reports are necessary to justify the big gains stocks have made. Stock prices in recent years have been climbing faster than earnings, which has led skeptics to call the market overly pricey.
Caterpillar soared $7.61, or 7.9 percent, to $104.42 after reporting stronger revenue and profits for the first quarter than analysts expected. It also raised its forecast for full-year results.
And it wasn’t the only big industrial company to cite signs of optimism among customers. 3M said sales improved in all its markets around the world, while reporting stronger quarterly earnings than expected.
Such encouraging talk about the economy’s strength raises hopes that revenues and profits can keep rising for companies, which could rein in worries about stocks being expensive.
McDonald’s jumped $7.47, or 5.6 percent, to $141.70 after likewise surprising investors with better-than-expected results. New items on its menu helped it to drive sales at its U.S. restaurants.
Ryder System was among the relatively few stocks to fall on Tuesday. It lost $11.00, or 13.9 percent, to $68.28 after weaker-than-expected rental demand pushed it to report lower quarterly results than analysts had forecast.
Slightly more than two stocks rose for every one that fell on the New York Stock Exchange.
Even with so many corporate earnings reports on the docket, politics is still at center stage for stocks as well.
Global markets added to big gains made on Monday, when markets soared after results from the first round of France’s presidential election raised expectations that the European Union and the euro currency will remain intact.
In Europe, France’s CAC 40 rose 0.2 percent and reached its highest closing level since 2008. Germany’s DAX rose 0.1 percent, and the FTSE 100 in London rose 0.2 percent. In Asia, Japan’s Nikkei 225 index climbed 1.1 percent, South Korea’s Kospi gained 1.1 percent and the Hang Seng in Honk Kong jumped 1.3 percent.
In the U.S., one of the main reasons for the stock market’s strong ascent since November is excitement about the prospect for lower taxes for businesses.
President Donald Trump is expected to unveil details of his tax plan on Wednesday, including a cut in the corporate tax rate to 15 percent from 35 percent.
Investors, though, have grown more skeptical about the ability for Republicans in Washington to push through big change following their stumbles in overhauling the nation’s health care system. If a corporate tax cut does occur, it would likely help lift companies’ profits — and stock prices — even further.
In the commodities market, the price of gold fell $10.30 to settle at $1,267.20 per ounce, silver dropped 27 cents to $17.59 per ounce and copper added 3 cents to $2.58 per pound.
Benchmark U.S. crude oil rose 33 cents to $49.56 per barrel. Brent crude, which is used to price international oils, rose 50 cents to $52.10 per barrel. Natural gas fell 2 cents to $3.04 per 1,000 cubic feet, heating oil inched up a fraction of a penny to $1.55 per gallon and wholesale gasoline was close to flat at $1.62 per gallon.
The euro rose to $1.0939 from $1.0858 late Monday. The dollar rose to 111.09 Japanese yen from 109.79, and the British pound rose to $1.2830 from $1.2789.
Interest rates continued to climb from the low they set in the middle of the month. The yield on the 10-year Treasury rose to 2.33 percent from 2.27 percent late Monday. It was 2.17 percent a week ago.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info