STT State Street Corporation

Strong results recently from companies could signal end to trend of quarterly declines

By Riva Gold and Daniel Huang 

U.S. stocks rose as companies unleashed a fresh round of deals and earnings.

Nearly 300 companies in the S&P 500 are expected to have reported earnings by the end of this week, according to FactSet. Analysts polled by FactSet have projected a sixth consecutive quarter of declines from the year-earlier period, but strong results in recent weeks added to optimism that the third quarter might break the trend.

The S&P 500 snapped a two-week losing streak on Friday after a number of better-than-expected results.

"Both sales and earnings have been positive so far," said Michael Arone, chief investment strategist at State Street Global Advisors. "This quarter has the potential to end the earnings recession."

The Dow Jones Industrial Average rose 77.32 points, or 0.4%, to 18223.03 on Monday. The S&P 500 gained 10.17 points, or 0.5%, to 2151.33. The Nasdaq Composite outperformed its peers with its biggest jump since Sept. 21, rising 52.42, or 1%, to 5309.83.

Nasdaq-listed B/E Aerospace surged $8.28, or 16%, $58.89 after Rockwell Collins agreed to buy it and both companies reported quarterly results. Shares of Rockwell Collins fell 5.25, or 6.2%, to 79.21 after the companies confirmed the proposed deal Sunday.

T-Mobile US, also in the Nasdaq, added 4.44, or 9.5%, to 51.19 after announcing an increase in earnings, revenue and customers in the most-recent quarter.

"It's all about earnings right now," said Bill Northey, chief investment officer at the Private Client Group at U.S. Bank, noting that companies' performance rather than macroeconomic developments has been the key driver of stock markets in recent sessions.

Mergers also have been fueling moves.

TD Ameritrade lost 1.62, or 4.4%, to 35.46 after the company said it agreed to buy Scottrade Financial Services.

Shares of AT&T declined 63 cents, or 1.7%, to 36.86 after it reached an agreement over the weekend to buy Time Warner for $85.4 billion, in a deal that could face political and regulatory hurdles. Time Warner dropped 2.74, or 3.1%, to 86.74.

"This is an environment where corporations are looking into the future -- where interest rates are moving up -- and they're using this as an opportunity to better position themselves in a low-rate environment," said Robert Pavlik, chief market strategist at Boston Private Wealth. Companies can borrow more cheaply at low rates in order to fund acquisitions.

U.S. government bonds pulled back Monday, with the yield on the 10-year Treasury note rising to 1.763% from 1.740% Friday. Yields move inversely to prices.

Spanish assets led gains in Europe after the country ended its 10-month leadership impasse on Sunday as Mariano Rajoy was assured of re-election as prime minister. Spain's IBEX 35 index gained 1.3%.

"It's a mini-step forward potentially in Spain," said David Lloyd, head of institutional fund management for fixed income at M&G Investments, but more broadly, "the issue of political uncertainty is just about everywhere you look," he said.

European bank shares continued to perform well after a strong week, with the Euro Stoxx Banks index advancing 2.7% Monday.

Germany's DAX index added 0.5% and closed at its highest level of the year, while the Stoxx Europe 600 dropped less than 0.1%.

Stocks in Asia were mostly higher Monday, led by a 1.2% rise in the Shanghai Composite Index. Shares in Hong Kong climbed 1%, while Japan's Nikkei Stock Average inched up 0.3%.

Write to Riva Gold at riva.gold@wsj.com and Daniel Huang at dan.huang@wsj.com

(END) Dow Jones Newswires

October 25, 2016 02:47 ET (06:47 GMT)

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