By Mark DeCambre, MarketWatch
Equities add to gains after strong JOLTS report
U.S. stocks traded stronger on Tuesday on the back of healthy
earnings reports, reversing a lower finish by major benchmarks a
day earlier that was led by a decline in technology and
internet-related companies.
A fresh batch of corporate earnings and further developments in
global tensions, surrounding Brexit and Italy's budget, remain a
focus.
What are the benchmarks doing?
The Dow Jones Industrial Average was up 363 points, or 1.4%,
while the S&P 500 added 39.45 points, or 1,4%. Meanwhile, the
Nasdaq Composite Index was up 133.16 points, or 1.8%, at
7,506.42.
The S&P 500 has declined in seven of the past eight
sessions, while the Dow slipped in four of the past five,
underscoring a mostly downbeat cycle for U.S. equity benchmarks of
late.
On Monday, the Dow reversed direction intraday
(http://www.marketwatch.com/story/pressure-set-to-resume-for-wall-street-as-stock-futures-pitch-lower-2018-10-15)
to fall 89.44 points, or 0.4%, to 25,250.55, while the S&P slid
16.34 points, or 0.6%, to close at 2,750.79. The Nasdaq Composite
fell 66.15 points, or 0.9%, to finish at 7,430.74.
Seen as a major driver for stocks, third-quarter earnings season
is under way in earnest this week. After a tough week for growth
stocks, all eyes will be on streaming video company Netflix Inc.
(NFLX) on Tuesday, which is due to report after the closing
bell.
What's driving markets?
In recent weeks investors have been concerned over the pace of
rising bond yields, global trade tensions and questions about
economic growth, factors that have had an outsize impact on
large-capitalization tech-related names with overseas
operations.
Meanwhile, investors await the Treasury Department's semiannual
currency report due later Tuesday. The report, and any accompanying
statements by Treasury Secretary Steven Mnuchin, will be parsed for
any signs that the U.S. deems China a currency manipulator.
In a late-Monday report, the Treasury said the U.S. government
ran its largest budget deficit in six years during the fiscal year
that ended last month. That is seen by some as unusual given the
strength of the domestic economy. The deficit totaled $779 billion
in the fiscal year that ended Sept. 30, up 17% from $666 billion in
fiscal 2017.
Meanwhile, the market has also closely watched negotiations
between the European Union and the Britain as it attempts to exit
from the trade bloc in a trade agreement in hand. The potential for
a clash between Italy and the European Union over Rome's budget
plans
(http://www.marketwatch.com/story/italys-government-oks-draft-budget-that-would-widen-deficit-2018-10-15)
is also in focus. Both matters threaten to disrupt global markets
should they sour.
Which data are in focus
U.S. industrial production rose 0.3% in September
(http://www.marketwatch.com/story/industrial-output-up-healthy-03-in-september-2018-10-16),
according to the Federal Reserve, beating Wall Street expectations
of 0.1%, according to a MarketWatch Survey.
The number of job openings in the U.S. reached another all-time
high of 7.1 million
(http://www.marketwatch.com/story/us-job-openings-jump-to-record-71-million-2018-10-16)
in August, according a report released Tuesday morning by the Labor
Department. The same report showed that American workers were
voluntarily quitting their jobs at a rate of 2.4% in August,
matching the July reading, which was the highest since 2001.
The National Association of Home Builders Confidence Index
ticked up one point to 68 in October, though it remains down from a
cycle high of 74, reached in December of 2017.
What are analysts saying
Tuesday morning's gains prove that last week's declines were
"just normal volatility," rather than evidence of a fundamental
shift in investor sentiment, said Jim Smigiel, chief investment
officer of absolute return strategies at SEI.
Nevertheless, Smigiel argued that the "the strongest gains in
equity markets are behind us," and that volatility could be a
constant companion for investors going forward as "the chances of a
surprise on the upside are lower than surprises on the upside,"
when it comes to the broader U.S. economy.
Tech stocks were helping to lead the way due to "a healthy mix
of positive sell-side commentary" and Adobe (GS) raising its
revenue targets Monday evening
(http://www.marketwatch.com/story/adobe-stock-gains-after-company-sees-better-2019-2018-10-15),
according to Joel Kulina of Wedbush Securities. "No doubt an uptick
in risk appetite being seen as lack of any new negatives the early
driver more than anything," he wrote in a note to clients.
Which stocks are in focus
Goldman Sachs Group Inc. (GS)reported better than expected
earnings per share
(http://www.marketwatch.com/story/goldman-sachs-top-estimates-2018-10-16)
of $6.28, versus analysts expectations of $5.38. Shares were up
1.8% in morning trading.
Morgan Stanley(GS)posted a 20% increase in profits
(http://www.marketwatch.com/story/morgan-stanley-tops-estimates-with-profit-up-20-2018-10-16)
to $2.15 billion. The retail brokerage's revenue grew to $4.4
billion for the quarter, 4% higher year-over-year. Shares were last
up 4.5%.
UnitedHealth Group, Inc. (NFLX) helped push the Dow higher in
early trading as one of its strongest gainers, after the managed
health care company beat analysts earnings and revenue targets,
while raising its outlook for full-year 2018 earnings
(http://www.marketwatch.com/story/unitedhealth-raises-outlook-after-earnings-beat-2018-10-16)
per share to $12.10, from the prior range of $11.80 to $12.05.
Shares in the Minnesota-based firm rose 4.1% in morning
trading.
Consumer staples giant Johnson & Johnson(NFLX)beat earnings
and revenue estimates
(http://www.marketwatch.com/story/jj-raises-guidance-after-earnings-beat-2018-10-16),
with profits rising to $3.93 billion, or $1.44 per share, from
$3.76 billion, or $1.37 per share in the year-earlier period. The
New-Jersey based firm also raised its earnings outlook for the
year, helping to boost its share price 1.4% after the bell.
Adobe(NFLX) shares are up 8.2% in early trading, making it one
of the S&P's top gainers, following its revenue growth update
late Monday.
Streaming-video group Netflix Inc. (NFLX) will report after the
close of trade. Its performance will be keenly watched by
investors, given the company's place among so-called FANG names,
including Facebook Inc. (FB), Amazon.com Inc. (AMZN) and
Google-parent Alphabet Inc., which have had a substantial influence
on the broader market moves by dint of the market value of those
companies.
(END) Dow Jones Newswires
October 16, 2018 11:45 ET (15:45 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.