Strong corporate earnings continue to spur US stocks

A strong rally in shares of technology and financial companies has led stocks on Wall Street higher, extending their recovery from last week.

At the close of trading, the Dow Jones Industrial Average was up 399.28 points, or 1.6%, to 25,709.27. The S&P 500 added 1.2% to 2779.60 and the Nasdaq Composite advanced 1.15% to 7421.46.

Major stock indexes have recouped a big chunk of their losses after steep declines earlier in February, as corporate earnings suggest US firms remain on a strong footing.

A record 78% of S&P 500 companies have beaten analysts’ revenue estimates so far for the fourth quarter of 2017, and overall earnings growth is nearly 15%, which would make it the best quarter since 2011.

“If interest rates are going up because inflation is a little higher, because the economy is stronger, because earnings are better ... these are all positive things,” says Dan Miller, director of equities at GW&K Investment Management.

Leading gains in technology stocks, among the best-performing sectors in the S&P 500 this year, is HP, whose shares rose 5.8% after JP Morgan raised its rating for the stock to overweight from neutral.

Qualcomm added 5.1% after the chip giant said it was getting closer to negotiating a takeover deal by Broadcom.

In financials, Class B shares of Berkshire Hathaway — which posted a nearly $US45 billion annual profit at the weekend, thanks in part to a tax-cut windfall – jumped 3.6%.

Bond yields rise
Some investors remain concerned about the recent pickup in bond yields, which put pressure on stocks at the start of the month.

Investors be watching closely for new US Federal Reserve chairman Jerome Powell’s first policy update to the Congress on Tuesday.

“We’re not used to listening to him the way we now need to, and how he chooses his words will be scrutinised by many market participants for the first time,” says Larry Hatheway, chief economist at GAM Holding.

Specifics will be Mr Powell’s points of emphasis and his choice of language, Mr Hatheway says, as investors try to decipher his views on the US economy and path for monetary policy.

US Treasury 10-year bonds strengthened, with the yield at 2.857% compared with 2.871% on Friday. 

The Stoxx Europe 600 rose 0.5%, led by advances in shares of basic resources and technology companies. France’s CAC 40 gained 0.5%, Germany’s DAX rose 0.35% and the UK’s FTSE 100 was up 0.6%.