By Saumya Vaishampayan And Corrie Driebusch
U.S. stocks rose slightly Tuesday as a slew of positive
quarterly earnings reports helped offset a continued decline in the
biotechnology sector.
The Dow Jones Industrial Average rose 50 points, or 0.3%, to
18088.52, and the S&P 500 added 3.2 points, or 0.2%, to 2112.
The Nasdaq Composite added 2.9 points, or 0.1%, to 5063.
U.S. stocks had opened slightly higher, before declining in
early morning trading. By midday, equities were again in positive
territory.
"In a market that's been up huge, it's taking a breather," said
Ian Winer, head of equities trading at Wedbush Securities. Last
week, the Nasdaq Composite advanced to a record close for the first
time in 15 years, and on Friday, strong corporate results in the
technology sector catapulted both the Nasdaq and the S&P 500
into record territory.
Earnings reports were in focus for investors. On Tuesday, 41
companies in the S&P 500, more than 8% of the index, report
quarterly results.
Including results from 233 companies in the S&P 500,
first-quarter earnings are on track to fall 1.8% from a year
earlier. Earnings had been expected to decline 4.6% going into the
reporting season, pressured by a strong dollar and weak oil
prices.
"We've seen how much the dollar has rallied and it has been
widely discussed," said Jack Caffrey, equity portfolio manager at
J.P. Morgan Private Bank. "The fact that the strong dollar is
impacting results...is becoming a little less of a shock," he
added.
Instead, he said he is more focused on the outlook for margins
and how they will be affected by an eventual pickup in wage growth.
A decline in margins by itself doesn't cloud the outlook for
corporate profits, he said.
In earnings news Tuesday, Merck Co. raised its earnings guidance
for the year as its first-quarter results declined less than
expected. Its shares rose 5.1%, adding 19 points to the Dow.
Aetna Inc. boosted its profit outlook for 2015 again on Tuesday
as the health insurer reported better-than-expected earnings in the
latest quarter. Shares added 2.5%.
Apple Inc. said Monday it has sold 61.2 million iPhones in the
three months ended March 28, up 40% from the year-ago period.
Strong iPhone demand boosted Apple's profit, which increased 33% to
$13.57 billion in its fiscal second quarter. Still, shares fell
0.7%, as traders said investors were repositioning their
portfolios.
Also damping gains were biotechnology stocks. The sector has
outpaced broader market gains so far this year. Through Friday's
close, the Nasdaq Biotechnology index was up about 20% for the
year. The Nasdaq had rallied 7.5% through Friday's market close,
while the S&P 500 had added 2.9%.
On Tuesday the Nasdaq Biotechnology index fell 0.3. So far this
week it is down 4.4%.
"(Biotech) has been trading on an incredible multiple and
everybody owns it," said Mr. Winer, adding that it is tough to
point to any fundamental changes in the sector, and that the
declines in biotech stocks so far this week are "a normal
drawdown."
Some traders said investors are eagerly awaiting upcoming
macroeconomic events, including the Federal Reserve's two-day
policy meeting which begins Tuesday. While there is no press
conference scheduled following the meeting and economists don't
expect major changes to the policy statement, traders will be
carefully parsing the policy statement, which will be released
Wednesday, for any mentions of a stronger U.S. dollar and global
growth.
In commodity markets, gold futures rose 0.7% to $1211.10 an
ounce. Crude-oil futures added 0.1% to $57.06 a barrel.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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