By Alexandra Scaggs
U.S. stocks extended gains in afternoon trading Tuesday, with
riskier corners of the market leading benchmarks higher.
The Dow Jones Industrial Average gained 90 points, or 0.5%, to
16908. The S&P 500 added 13 points, or 0.6%, to 1974 and the
Nasdaq Composite Index rose 58 points, or 1.3%, to 4544.
Investors were moving back into areas that are seen as riskier,
traders said, after they fled some of those sectors during steep
stock-market declines earlier this month. Small-cap stocks, energy
shares and technology stocks posted the strongest gains, and
safe-haven investments such as Treasurys and utility stocks
declined. Traders said that investors were feeling more confident
after stronger-than-expected corporate earnings reports and an
upbeat reading on consumer confidence.
"The tunnel vision is off...once your scope gets bigger, the
fear subsides over this recent downturn in the market," said
Jonathan Corpina, senior managing partner at brokerage firm
Meridian Equity Partners.
So-called momentum stocks outpaced the broader market's rise.
The small-cap Russell 2000 Index, which has trailed broader
benchmarks in recent months, rallied 2.1%. The Nasdaq was bolstered
by an advance in biotechnology and social-media stocks, with the
Nasdaq Biotechnology Index advancing 1.1%.
"People have woken up to the fact that maybe global growth isn't
going to collapse," said Mark Luschini, chief investment strategist
for Janney Montgomery Scott, which helps oversee $58 billion in
assets. He added that short-term investors had bet on further
declines in some of those riskier sectors, and said traders could
be unwinding those bets.
Among large-cap stocks, two sectors that set the early-October
declines led benchmarks higher. Energy shares were the biggest
gainers in the S&P 500, with the sector advancing 1.5%. And the
Dow Jones Transportation Average jumped 1.1%, reaching a record
high intraday.
Investors are also looking ahead to a statement from the Federal
Reserve, due out Wednesday at the end of its two-day meeting. The
central bank is expected to end its bond-buying program, but
traders say they will be closely watching the central bank's
outlook for short-term interest rates.
In economic news, an upbeat reading on consumer confidence
outshined a surprise decline in durable-goods orders. Consumer
confidence rose to 94.5 in October, according to the Conference
Board, while a slide to 87.9 was expected. Orders for durable goods
unexpectedly fell 1.3% in September, marking the second consecutive
month of declines, the Commerce Department said. A rise of 0.7% was
expected.
Third-quarter earnings reports from companies have been better
than expected in recent sessions. With 213 companies reporting, the
S&P 500 is on pace to grow earnings 5.6% in the third quarter,
above the 4.5% expected before the start of reporting season.
"Even with European [economic] data deteriorating, these
companies' earnings are able to keep grinding higher," said Michael
Purves, chief global strategist at Weeden Co. "That's a very
important sign here."
On Tuesday, Pfizer Inc. reported third-quarter results that beat
analysts' estimates. The company also tightened its profit and
revenue outlook for the year. Still, shares slipped 0.4%.
DuPont Co. said earnings jumped 52% in its third quarter on
lower expenses. While that beat Wall Street's forecasts, the
chemical company's shares were little changed.
A broad advance in European stocks helped set a positive tone
early in the session. The Stoxx Europe 600 gained 0.9% in
relatively light trading.
In other economic news, a report on home prices in 20 U.S.
cities from S&P/Case-Shiller was nearly in line with
expectations, showing a rise of 5.6% in August, while economists
forecast a rise of 5.7%. A report on manufacturing in the
mid-Atlantic region beat forecasts, as the Federal Reserve Bank of
Richmond's manufacturing index rose to 20 in October, while a slide
to 10 was expected.
In commodity markets, crude-oil futures gained 0.1% to $81.08 a
barrel. Gold futures were little changed at $1229.00 an ounce.
Demand for safe-haven U.S. government debt declined, pushing the
yield on the 10-year Treasury note up to 2.279% from 2.257% on
Monday.
In other earnings news, Aetna Inc. lifted its earnings outlook
for the year and reported third-quarter results that beat
expectations. But shares fell 2.8%. The stock is up 12% so far this
year.
Twitter Inc. said Monday it added 13 million monthly active
users in the third quarter, up 4.8%. That is a slower pace than the
6.3% added in the previous quarter. The slowing user growth
overshadowed Twitter's revenue, which more than doubled in the
quarter and prompted an increase in full-year guidance. Shares sank
9.3%.
Coach Inc. reported a decline in profit and sales in the latest
quarter, with a slump in North American sales offsetting sales
gains internationally. Results topped expectations, but shares fell
6.3%.
Whirlpool Corp. said its profit rose 17% in the third quarter as
sales increased 3%. While results came in below analysts'
expectations, shares gained 7%.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com