By Corrie Driebusch
U.S. stocks rose on Tuesday as a number of positive quarterly
earnings reports helped offset a continued decline in the
biotechnology sector.
The Dow Jones Industrial Average rose 72.17 points, or 0.4%, to
18110.14, and the S&P 500 gained 5.84 points, or 0.3%, to
2114.76. The Nasdaq Composite fell 4.82 points, or 0.1%, to
5055.42.
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 the focus for investors. On Tuesday, 41
companies in the S&P 500, more than 8% of the index, reported
quarterly results.
A jump in Merck Co. shares helped lift indexes. Merck raised its
earnings guidance for the year as its first-quarter results
declined less than expected. Shares rose 5%, adding 19 points to
the Dow.
Aetna Inc.'s stock also climbed following its quarterly results.
The health insurer's shares added 3.2% as it reported
better-than-expected earnings in the latest quarter and boosted its
profit outlook for 2015 again on Tuesday.
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 declined
1.6%, as traders said investors were repositioning their
portfolios.
In late Tuesday trading, Twitter Inc. shares fell sharply after
the website Selerity reported the company's per-share earnings
results in a tweet. Shares were halted and Twitter officially
reported its quarterly results, giving downbeat sales guidance for
the current quarter and year and saying first-quarter revenue rose
less than expected. After reopening, Twitter shares plunged
18%.
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.
As many companies beat lowered earnings expectations, equities have
been trending higher.
"Valuations still don't look unreasonable to us," said Tony
Scherrer, director of research at Smead Capital Management, which
manages approximately $1.4 billion. Mr. Scherrer said the firm
likes consumer discretionary shares in particular. In addition to
the average consumer, who Mr. Scherrer believes hasn't yet reached
peak spending potential, he believes the sector will benefit from
the maturing millennial generation.
"There's an entire generation out there that hasn't come into
their own in terms of spending and household formation," he
said.
On Tuesday, the Nasdaq Biotechnology index fell 1.2%. So far
this week it is down 5.2%. The biotech sector has outpaced broader
market gains 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%.
"[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 were eagerly awaiting coming
macroeconomic events, including the Federal Reserve's two-day
policy meeting which begins Tuesday. While there is no news
conference scheduled following the meeting and economists don't
expect major changes to the policy statement, traders will be
carefully parsing the statement, which will be released Wednesday,
for any mentions of a stronger U.S. dollar and global growth.
In commodity markets, gold futures rose 0.9% to $1214.00 an
ounce. Crude-oil futures added 0.1% to $57.06 a barrel.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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