By Joyce Yu
Philadelphia, PA–Fueled by better corporate earnings, US stocks jumped Tuesday as the market enters the busiest days of the earnings season.
The Dow Jones industrial average snapped its impressive six-day run of records on Monday, shedding 0.2%. The S&P 500 and the Nasdaq declined 0.4% and 0.6% respectively. On Tuesday, U.S. stocks opened sharply higher while European markets were mixed in their morning sessions. Japan’s Nikkei hit another record high over optimism after Prime Minister Shinzo Abe’s election victory.
“This is very much earnings-driven,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management. “The economically sensitive sectors of the S&P 500 have seen some strong earnings and that’s what we needed.”
Quincy Krosby, chief market strategist at Prudential Financial, headquartered in Newark, New Jersey, told the Reuters market is not down in a “meaningful” way, but taking a pause. “This is the week for earnings,” she said. “The market basically wants to ascertain that they’re going to see top-line revenue growth and bottom-line performance before they commit themselves.”
Corporate earnings have gotten off to a strong start, with 73.2 percent of the 97 S&P companies beating profit expectations versus a 72-percent beat rate over the past four quarters. One outperforming stock is Caterpillar which saw its shares advancing 7 per cent ahead of the bell after the maker of construction and mining equipment raised its full-year outlook. 3M, the Scotch tape and Post-it maker, tacked on as much as 4 per cent after it lifted its 2017 sales and earnings outlook following a strong third quarter.
This week is set to be the busiest of the earnings season, with nearly a third of S&P 500 companies set to issue their quarterly results. McDonald’s edged up 0.65 percent after reporting sales that beat estimates. Driven by the burger chain’s recent image change and menu additions, its shares are up 34% year to date. It’s a different story, however, at Chipotle Mexican Grill whose shares are down 15% in 2017 due to norovirus outbreaks, as well as a recent rodent sighting in one of its restaurants in Dallas.
“The reaction to the earnings from the Dow components is in favor,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas. “Chances are, with this strong an opening, it will likely remain positive.”
Wall Street will also keep an eye on Washington, as investors looked for any developments in relation to tax reform. Last week, the Senate passed a budget proposal that allowed Republicans to move closer to eventually passing tax reform. The GOP is now reportedly moving quickly to try and get tax reform before the end of the year.
