Old economy profits send stocks on Wall Street higher

Strong corporate profit reports reflecting growth in the economy pushed stocks on Wall Street higher.

Road and rail operators helped lead the S&P 500 higher after JB Hunt Transport Services reported stronger-than-expected revenue for the first three months of the year.

The shares gained 6.1% and spilled over to benefit other freight companies, sending industrial firms in the S&P 500 up more than 1%.

Logistics firm CH Robinson Worldwide added 3.5% while rail-road operators Norfolk Southern and Kansas City Southern gained 1.5% each.

Analysts expect companies in the S&P 500 to increase earnings by their widest margin in six years and say the benefits of the tax overhaul passed last year and a strong economic backdrop should push profits higher.

The better results should help markets “continue their longer-term trend of improving fundamentals,” says Jason Pride, chief investment officer of Glenmede.

At the close of trading, the Dow Jones Industrial Average was up 212.90 points, or 0.9%, to 24,573.04. The S&P 500 added 0.8% to 2677.84 while the Nasdaq Composite rose 0.7% to 7156.28.

Transport index rises 2%
The Dow Jones Transportation Average, an index of 20 of the largest US airlines, railways and road transport firms, climbed 2.2%, its biggest gain in more than a month.

However, some investors worry that good earnings reports may not give stocks that big of a bounce since valuations are still relatively high, even after the recent selloff helped pull down forward-earning multiples for the S&P 500.

Meanwhile, the labour market is tight, which could nudge inflation to rise more quickly than expected and resource costs could soon become problematic, says Jim Paulsen, chief investment strategist of the Leuthold Group.

Several banks, including JPMorgan Chase, saw their share prices fall after reporting strong earnings on Friday.

“Solid corporate performance should help buffer the stock market against a severe collapse,” Mr Paulsen says.

“However, for a host of reasons, investors should probably moderate upside expectations due to robust earnings results this year.”

Bond yields rise
US government bond prices fell as investor risk appetite improved after the US, UK and France engaged in only limited airstrikes in Syria and a report showed retail sales grew in March.

The Commerce Department said retail sales increased a seasonally adjusted 0.6% in March from the prior month. Economists had expected a 0.3% increase.

The yield on the benchmark Treasury 10-year note rose to 2.841% from 2.828% on Friday.

Oil prices retreated from a three-year high reached at the end of last week, as geopolitical risks to supply receded.

Light, sweet crude for May delivery fell 84USc, or 1.3%, to $US66.55 a barrel. Brent, the global benchmark, fell 81USc, or 1.1%, to $US71.77 a barrel.

The Stoxx Europe 600 fell 0.4%. France’s CAC 40 eased 0.04%, Germany’s DAX dropped 0.4% and the UK’s FTSE 100 lost 0.9%.