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Strong earnings from AT&T, 3M lift the Dow
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Solid U.S. corporate earnings and higher spirits in Europe propelled U.S. stocks higher Tuesday.
Five of the 30 big companies that make up the Dow Jones industrial average rose more than 1.5 percent. AT&T led the gains after reporting better-than-expected profit. Verizon, AT&T’s main rival, was close behind. 3M rose sharply after delivering an impressive quarterly report. GE and Pfizer rounded out the list of top gainers.
Chocolate maker Hershey and oilfield services firm Baker Hughes helped boost the Standard & Poor’s 500 index after both companies beat Wall Street’s expectations.
Apple, the biggest company by market value, will report its quarterly earnings after the close. Its stock fell sharply, dragging down the tech-heavy Nasdaq composite index.
Earnings reports are coming in far above analysts’ expectations, providing temporary relief for markets roiled by fears about Europe, said Sam Stovall, chief equity strategist with financial-data firm S&P Capital IQ. He said analysts had expected only a half-percent profit increase for the S&P 500 this quarter. Based on results so far, he said, the gain could be 10 times bigger.
“These are legitimately strong results, and in retrospect, the bar was set too low,” Mr. Stovall said.
The gains for blue chips were broad. Only seven Dow components fell, led by Wal-Mart Stores. The world’s biggest retailer is reeling from reports over the weekend that top company officials knew about widespread bribery of foreign officials.
European stocks rallied into the close a day after one of their worst drops in months. Monday’s sell-off followed fears that deficit-cutting deals by some European nations might unravel.
On Tuesday, as Monday’s panicked atmosphere lifted, interest rates on Spanish bonds already in circulation declined. France’s CAC-40 index closed up 2.3 percent. Germany’s DAX rose 1 percent; London’s FTSE 100 was up 0.8 percent.
Still, there were signs that Europe’s troubles persist. Bond investors demanded much higher interest rates from Spain and Italy when they auctioned new debt, suggesting that there is more pain ahead for those debt-strapped countries.
Stovall expects fears about Europe to overshadow earnings results in the coming weeks. After months of strong stock-market gains and little talk about Europe, traders are again nervous that the crisis will boil over, harming the global economy and gumming up the financial system, he said.
“First-quarter earnings are helping to justify the equity market’s advance since early October,” Stovall said. “If Europe continues to have its problems, that will outweigh” the corporate earnings news, he said.
Stocks rose consistently from early October through the end of the first quarter on March 31. Trading has since turned volatile. Swings of more than 100 points in the Dow have become common, a contrast to the steady, modest gains of the first three months of the year.
The Dow was up 72 points to 12,999 as of 2 p.m. EDT. IBM rose solidly after the company said it is raising its quarterly dividend and plans to repurchase $7 billion more of its stock.
The S&P 500 rose three points to 1,369.
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