By Jon Sindreu and Allison Prang
U.S. stocks rose Tuesday following Federal Reserve Chairman
Jerome Powell's Senate testimony, while investors also continued
dissecting the latest round of corporate earnings results.
The Dow Jones Industrial Average added 55.53 points, or 0.2%, to
25119.89. The S&P 500 rose 11.12 points, or 0.4%, to 2809.55,
and the technology-focused Nasdaq Composite climbed 49.40 points,
or 0.6%, to 7855.12.
Mr. Powell told Congress that strong economic growth and stable
inflation should keep the central bank on track to gradually raise
short-term interest rates.
He added he wants inflation to stay around 2% and that the
economy is "just shy" of hitting that point. He also touched on
trade tensions, saying he thought countries that are open to trade
have grown more quickly and commented on the new tax law, saying it
was too early to see its impact.
Mr. Powell's remarks were made before the Senate Banking
Committee as part of his semiannual monetary policy report.
Derivatives markets were pricing in a 62% chance that rates will
rise at least twice more this year, according to data by CME
Group.
Quincy Krosby, chief market strategist for Prudential Financial,
said Mr. Powell's comments demonstrated the Fed is following the
trade situation and looking at whether the economy could be hurt by
businesses acting more cautiously. There were concerns that, no
matter where the economy stood, Mr. Powell wanted to do four rate
increases in 2018, she said.
The chairman's reassuring remarks also took eyes off Netflix,
said Dan Morgan, senior portfolio manager at Synovus Trust. After
the market closed Monday, Netflix reported new subscriber growth
for its recent quarter that fell short of estimates, prompting
shares to fall sharply. The stock ultimately made up some of its
earlier declines and fell $21, or 5.2%, to $379.48.
Bob Doll, senior portfolio manager and chief equity strategist
for Nuveen Asset Management, said he was surprised tech stocks
rallied Tuesday in light of Netflix's disappointing results and
speculated some investors used the drop in Netflix shares as a
buying opportunity.
Tech giants have been key in driving stock-market gains in 2018,
and investors are looking for signs that their customer growth is
in line with optimistic expectations.
"When you have had such a huge run...if one of them has a bump"
it makes people wonder if they should take what they've made and
get out, Mr. Doll said, noting Monday's after-hours slump in tech
stocks was "more typical."
So far, the second-quarter earnings season is off to a broadly
positive start, even though companies have a high bar to beat:
Analysts expect earnings for S&P 500 companies to grow 20% from
a year earlier, according to data provider FactSet.
Among the companies whose shares rose after reporting quarterly
results were Johnson & Johnson and Progressive. Strong sales of
J&J's cancer drugs and other medicines helped boost its revenue
and earnings, pushing shares up 4.42, or 3.5%, to 129.11, their
highest percentage increase since January 2016. Progressive,
meanwhile, posted a sharply higher profit as the insurer continued
to see growth in active policies and net premiums written. Its
shares climbed 98 cents, or 1.7%, to 59.40.
But shares of Goldman Sachs, the latest large U.S. bank to
release second-quarter earnings, slipped 42 cents, or 0.2%, to
231.02. Despite reporting strong profits, Goldman's revenue fell
below analysts' expectations. The firm also said David Solomon
would succeed Lloyd Blankfein as chief executive starting Oct.
1.
"There's no reason to expect anything but impressive headline
numbers," said Emiel van den Heiligenberg, head of asset allocation
at Legal & General Investment Management. "While solid earnings
growth will not come as a big surprise to most investors, it should
provide a positive backdrop to markets in the coming weeks at a
time where sentiment seems neutral to slightly bearish."
Oil prices steadied after steep losses Monday, with U.S. crude
settling up less than 0.1% at $68.08 a barrel.
The oil market has been buffeted by expectations of supply
increases from Libya, Russia and other producers, as well as
worries that weaker global economic growth will lower demand for
commodities.
The Stoxx Europe 600 added 0.2%. In Asia, Japan's Nikkei Stock
Average closed up 0.4%, helped by a weak yen, but Hong Kong's Hang
Seng and the Shanghai Composite slumped 1.3% and 0.6%,
respectively.
Write to Jon Sindreu at jon.sindreu@wsj.com and Allison Prang at
allison.prang@wsj.com
(END) Dow Jones Newswires
July 17, 2018 17:24 ET (21:24 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.