By Alexandra Scaggs
U.S. stocks rose Tuesday, putting the S&P 500 and the Nasdaq
on track for October gains, as riskier corners of the market led
benchmarks higher.
The Dow Jones Industrial Average gained 125 points, or 0.7%, to
16943. The S&P 500 added 17 points, or 0.8%, to 1978, on pace
to gain 0.3% for October. The Nasdaq Composite Index rose 67
points, or 1.5%, to 4553, on track for a 1.3% monthly advance.
Investors were moving back into areas that are seen as riskier,
traders said, after they had 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.
A rally in 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 2.3%. The Nasdaq was
bolstered by an advance in biotechnology and social-media stocks,
with the Nasdaq Biotechnology Index advancing 0.8%.
"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 traders could be
unwinding those bets.
Among large-cap stocks, two sectors that set the early-October
declines led benchmarks higher. The Dow Jones Transportation
Average jumped 1.1%, reaching a record high intraday. Energy shares
were the biggest gainers in the S&P 500, advancing 1.8%. The
sector has struggled over the last three months, down 14% compared
with the S&P 500's 0.1% decline. But all year, investors have
been steadily sending money into State Street's Energy Select
Sector SPDR Fund, said Mike Arone, State Street Global Advisors'
chief investment strategist for financial advisers.
"There is anticipation that if the economy continues to do well,
if Europe can recover... energy prices will pick up," said Mr.
Arone. "That is bolstering flows into the stocks."
Investors are now 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.
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 fell 1.3% in September,
marking the second consecutive month of declines. A rise of 0.7%
was expected.
Third-quarter earnings 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,
according to FactSet, 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 and tightened its profit and revenue outlook
for the year. Still, shares slipped 0.2%.
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 lost 0.1%.
A broad advance in European stocks helped set a positive tone
early in the session. The Stoxx Europe 600 gained 1%.
In other economic news, a report on home prices in 20 U.S.
cities from S&P/Case-Shiller showed 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 0.5% to $81.35 a
barrel. Gold futures slipped 0.1% to $1228.50 an ounce.
Demand for safe-haven U.S. government debt declined, pushing the
yield on the 10-year Treasury note up to 2.277% 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
8.8%.
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
6.5%.
Whirlpool Corp. said its profit rose 17% in the third quarter as
sales increased 3%. While results came in below analysts'
expectations, shares gained 6.6%.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com