Business World

Thursday 14 November 2019

US stocks see a second straight day of strong gains, boosted by encouraging earnings reports from major firms including Caterpillar and McDonald's

Stan Choe

The Standard & Poor's 500 index rose 14.46 points, or 0.6pc, to 2,388.61. The figure was 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 1.1pc, to 20,996.12.

The Nasdaq rose 41.67, or 0.7pc, to 6,025.49, its first move above 6,000 points. The Russell 2000 of smaller-company stocks was up 13.13 points, or 0.9pc, 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 US 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 10pc 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 sceptics to call the market overly pricey.

Caterpillar soared 7.61 dollars, or 7.9pc, to 104.42 dollars after reporting stronger revenue and profits for the first quarter than analysts expected. It also raised its forecast for full-year results.

And it was not 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 dollars, or 5.6pc, to 141.70 dollars after likewise surprising investors with better-than-expected results. New items on its menu helped it to drive sales at its US restaurants.

Ryder System was among the relatively few stocks to fall on Tuesday. It lost 11.00 dollars, or 13.9pc, to 68.28 dollars 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 centre 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 0.2pc and reached its highest closing level since 2008. Germany's DAX rose 0.1pc and the FTSE 100 in London rose 0.2pc. In Asia, Japan's Nikkei 225 index climbed 1.1pc, South Korea's Kospi gained 1.1pc and the Hang Seng in Hong Kong jumped 1.3pc.

In the US, 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 15pc from 35pc.

Investors, though, have grown more sceptical 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 be likely to help lift companies' profits - and stock prices - even further.

In the commodities market, the price of gold fell 10.30 dollars to settle at 1,267.20 dollars per ounce, silver dropped 27 cents to 17.59 dollars per ounce and copper added 3 cents to 2.58 dollars per pound.

Benchmark US crude oil rose 33 cents to 49.56 dollars per barrel. Brent crude, which is used to price international oils, rose 50 cents to 52.10 dollars per barrel. Natural gas fell 2 cents to 3.04 dollars per 1,000 cubic feet, heating oil inched up a fraction of a penny to 1.55 dollars per gallon and wholesale petrol was close to flat at 1.62 dollars per gallon.

The euro rose to 1.0939 dollars from 1.0858 dollars late on Monday. The dollar rose to 111.09 Japanese yen from 109.79, and the British pound rose to 1.2830 dollars from 1.2789 dollars.

PA Media

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