By Alexandra Scaggs
U.S. stocks rose Tuesday, with technology shares leading broader
benchmarks higher.
Stocks pared gains in afternoon trading, after a steep morning
rally. The Dow Jones Industrial Average advanced 117 points, or
0.7%, to 17758. The S&P 500 index gained 10 points, or 0.5%, to
2038.
The technology sector made a strong showing Tuesday, with the
tech-heavy Nasdaq Composite Index rising 40 points, or 0.9%, to
4722. Apple Inc. and Amazon.com Inc. rallied 1.6% and 2.5%,
respectively, after upgrades from Wall Street analysts.
The Nasdaq Biotechnology Index jumped 1.4%, and large-cap tech
stocks in the S&P 500 outperformed the broader index, rising
1%.
"There's been volatility and pullbacks in a lot of the Internet
[stocks], so investors are looking to pick their spots" ahead of
earnings season, said Brian Fenske, head of sales trading at
brokerage ITG in New York.
The rally followed sharp gains in Europe and a report from China
showing strengthening global demand. U.S. stocks started to drift
lower after the close of trading in many European stock
markets.
The Stoxx Europe 600 surged 1.4%. European markets have set the
tone for U.S. trading in recent sessions, strategists say, as
investors look ahead to a European Central Bank meeting on Jan. 22.
While the Federal Reserve prepares to raise short-term interest
rates, a move widely expected this year, U.S. stocks have rallied
in recent months on new stimulus measures from central banks in
Japan and China.
Now, investors expect the ECB will be the next central bank to
introduce stimulus measures.
"The ECB is just as important to U.S. stocks right now as the
Fed," said Michael Purves, chief global strategist with Greenwich,
Conn.-based brokerage firm Weeden & Co. "More and more people
are expecting them to announce [stimulus] in the form of sovereign
bond purchases."
China's exports rose by a stronger-than-expected 9.7% in
December, according to official data released Tuesday, on the back
of robust demand from the U.S., Europe and Southeast Asia.
The data showed that while global growth concerns remain,
"things aren't completely falling apart," said Colin Cieszynski,
chief market strategist at CMC Markets. It "alleviates some of
those concerns," he added.
Demand fell for the 10-year U.S. Treasury note as investors
rotated into riskier investments, pushing the yield on the 10-year
note up to 1.920% from 1.909% on Monday.
Intel was among the biggest gainers in the Dow, ahead of its
earnings report slated for Thursday. Analysts expect the company to
report earnings growth of 26%, according to FactSet. Investors are
broadly turning their attention to fourth-quarter earnings season,
which unofficially kicked off with Alcoa's earnings on Monday.
"People feel like fundamentals are solid," said ITG's Mr.
Fenske. "Some of the risks out there are [already] talked about...
[which] gets priced in pretty quickly" to stock prices.
After some early reports, companies in the S&P 500 are on
pace to report fourth-quarter earnings rose 0.9% from last year.
That is slightly below initial forecasts for 1.1%, according to
FactSet, which would be the weakest quarter of profit growth since
the third quarter of 2012.
A months-long slump in oil prices is expected to weigh on
earnings, with analysts forecasting the sector's fourth-quarter
earnings will decline 19% from last year. U.S. stocks have seesawed
in the first several sessions of 2015, largely alongside the price
of oil. As of Monday's close, the S&P 500 was down about 3%
from its record close.
Crude-oil prices fell further Tuesday, recently down 0.8% to
$45.71 a barrel.
But energy shares in the S&P 500 were nearly flat, and
traders said that Tuesday's oil-price decline wasn't steep enough
to spark more worries about global growth.
In other corporate news, Alcoa's shares slipped 1.6%, despite
reporting better-than-expected profits. It cited strong growth in
its aerospace and automotive businesses, and a rebound in prices
for raw aluminum.
J.P. Morgan Chase & Co. and Wells Fargo & Co. gained 1%
and lost 0.1%, respectively, ahead of reporting fourth-quarter
results Wednesday. Both banks are expected to post slight earnings
growth as they kick off bank earnings season.
Stocks in China and Hong Kong advanced after China's upbeat
report, with Hong Kong's Hang Seng Index up 0.8% and China's
Shanghai Composite gaining 0.2%. Japan's Nikkei Stock Average fell
0.6% after being closed Monday for a public holiday.
In other markets, gold futures added 0.3% to $1236.10 an
ounce.
-Saumya Vaishampayan contributed to this article.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com
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