By Will Horner 

Rising shares of Netflix and other streaming companies led the S&P 500 higher Wednesday, reviving Wall Street's appetite for growth stocks.

Shares of the streaming giant jumped 14% by Wednesday afternoon, putting Netflix stock on pace for its biggest single-day gain in more than four years. The gains came after Netflix reported better-than-expected results for the most recent quarter, showing that it had more than 200 million subscribers at the end of last year, enough cash to fund further growth without having to assume more debt and that it is considering buying back some of its stock.

Investors took the results as a sign that streaming companies have been clear winners throughout the Covid-19 pandemic. With millions of Americans spending large chunks of time at home, many have passed the time by watching movies and series on Netflix, Disney, Amazon.com's Prime service and others.

Shares of other streaming companies also rose, including Disney, Amazon and Roku.

That pushed the S&P 500 up 1.1% in recent trading, while the Nasdaq Composite gained 1.7%. The Dow Jones Industrial Average also rose, adding 190 points to 31120.

Earnings results so far have been better than expected, with 88% of reporting companies beating expectations, according to FactSet. That, along with expectations of further profit growth this year and a rebound in economic activity, should act as a foundation for further stock market gains, analysts said.

"Restrained inflation, low interest rates and rising earnings provide valuation support and the basis for stocks to trend higher," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, wrote to clients in a recent note, adding that favorable growth trends for communications stocks such as Netflix, along with companies in the tech, consumer discretionary and health-care sectors, remain intact.

The advance has so far solidified the stock market's upbeat week leading into the inauguration of Joe Biden on Wednesday. Investors remain optimistic that fiscal stimulus is supporting businesses through the damage wrought by the Covid-19 pandemic, with expectations of further spending by Democrats to keep the economy on track.

Still, investors' are showing they are selective by punishing companies that fail to meet the market's expectations, said Brian O'Reilly, head of market strategy at Mediolanum Investment Funds.

"Any company that is likely to miss or modestly disappoint on earnings will be punished quite heavily," said Mr. O'Reilly. "A lot of optimism has already been priced in and typically you don't get too much room for maneuver when a stock is at a historic high."

Shares of UnitedHealth, for example, fell 1.3% after the health-care company reported a smaller profit in the last quarter of 2020.

Those losses were easily offset by gains elsewhere. Netflix's rise led shares of communication companies up more than 3%. Tech stocks rose nearly 2%, while consumer discretionary stocks added 1.7%.

Cyclical sectors fell along with companies that reported lackluster earnings. Financial stocks in the S&P 500 slid 0.7%, while consumer staples slipped 0.2%.

As earnings reports pick up, focus is likely to center on sectors most exposed to the U.S. economy, such as banks and energy companies, and those which have suffered the most during the pandemic, such as leisure and hospitality, said Hugh Gimber, a strategist at J.P. Morgan Asset Management.

"The most interesting thing will be how much leveling-off do we see, how much are last year's laggards able to catch up," he said.

Overseas, the Stoxx Europe 600 index rose 0.7%. Shares of Pearson rose nearly 6% after the British education publisher reported sales growth, in part due to the increase in online learning during the pandemic.

In Asia, stocks indexes were mixed. The Nikkei 225 ended the day down 0.4%, while the Shanghai Composite Index rose 0.5%. Chinese internet giant Alibaba jumped 8.5% in Hong Kong after the company's embattled owner, Jack Ma, made his first public appearance in three months, ending concerns about his whereabouts.

In Hong Kong, the Hang Seng Index gained 1.1% to hit a 20-month high, with stocks buoyed in recent days by hefty inflows from mainland China.

-- Michael Wursthorn contributed to this article.

Write to Will Horner at William.Horner@wsj.com

(END) Dow Jones Newswires

January 20, 2021 12:10 ET (17:10 GMT)

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