By Tomi Kilgore
U.S. stocks advanced Tuesday as an improving corporate earnings
outlook helped take the Dow Industrials to within striking distance
of a fresh record high.
The Dow Jones Industrial Average climbed 88 points, or 0.5%, to
16537. The gains brought the Dow within 0.2% of its Dec. 31 record
closing high of 16576.66. The S&P 500 index added eight points,
or 0.5%, to 1878 and the Nasdaq Composite Index tacked on 24
points, or 0.6%, to 4098.
The recently hard-hit biotechnology and Internet sectors, which
have weighed heavily on the Nasdaq this month, rallied Tuesday. The
iShares Nasdaq Biotechnology exchange-traded fund ran up 2% and the
PowerShares Nasdaq Internet ETF rallied 2.2%. Those ETFs remained
down 3.8% and 7%, respectively, so far this month. The Nasdaq has
lost 2.4% in April, while the S&P 500 has gained 0.3%.
Continued upbeat earnings news helped provide a positive
backdrop for stocks. With 55% of the S&P 500 having reported
first-quarter results through Tuesday morning, overall earnings per
share are now seen rising 0.6% from year-ago levels, according to
FactSet, versus expectations of a 1.2% decline at the end of March.
Revenue is seen growing 2.4% from last year, according to
FactSet.
"It's all about earnings. That is the guiding light," said Karyn
Cavanaugh, market strategist with ING U.S. Investment Management,
which manages about $200 billion. "Despite everything we've been
worried about this year, companies are getting it done."
Art Hogan, chief market strategist at Wunderlich Securities,
said earnings haven't been great, but they have been better than
investors feared. "And with revenue growth above earnings growth,
that is a positive," he said.
Within the Dow, Merck advanced 3.2% to lead the pack after the
drug maker reported first-quarter earnings that exceeded analyst
estimates and affirmed its 2014 outlook.
Elsewhere, Sprint ran up 8.6% after topping earnings and revenue
forecasts, which overshadowed a net decline in postpaid
customers.
Twitter, which reports first-quarter results after the close,
climbed 3.5%.
Investors will be looking ahead to a barrage of economic news
later in the week, including the first look at first-quarter
economic growth and the Federal Reserve's policy statement on
Wednesday, a reading on manufacturing activity on Thursday and the
monthly employment report on Friday.
Natalie Trunow, chief investment officer of Calvert Investments,
which oversees about $13 billion, believes the recent economic data
and corporate earnings have affirmed the idea that the slowing of
economic growth in the first quarter was because of the weather,
and wasn't enough to derail the growth trend.
"We're no longer in the recovery phase, we're in an extension,"
Ms. Trunow said. "The market may be anticipating that."
Terry Sandven, chief equity strategist at U.S. Bank Wealth
Management, with $120 billion in assets under management, said
given the key economic data out later this week, and all the
earnings coming out, there is a good chance that "as this week
goes, so the equity market will go into the middle of the
year."
On Tuesday, economic data was mixed. Consumer confidence for
April missed expectations, but the reading for March was revised
sharply higher. And home prices rose in February over year-ago
levels, but slightly less than expected.
The yield on the 10-year Treasury note ticked up to 2.706% from
2.680% late Monday.
Gold futures were little changed at $1,299 an ounce, after
snapping a three-session win streak on Monday. Crude-oil futures
gained 0.9% to $101.71 a barrel. The dollar edged up against the
yen and the euro.
In Europe, the Stoxx Europe 600 rallied 1.2% following positive
corporate news from regional heavyweights. Asian markets were
mostly higher, with China's Shanghai Composite rising 0.8%. Japan's
market was closed for a holiday.
In other corporate news, Herbalife was up 4.1% after the
nutritional-supplements company reported late Monday
better-than-expected first-quarter earnings, and said it was ending
its dividend so it could use the cash to buy back more stock.
Coach slumped 8.5% after the luxury-handbag-and-accessories
retailer's fiscal third-quarter earnings topped estimates, but
sales fell slightly more than expected.
In-flight Internet connectivity company Gogo tumbled 22% after
AT&T unveiled late Monday plans to launch a similar service.
The early declines take Gogo's stock price below the $17 price of
the initial public offering in June 2013. Dow component AT&T
gained 1%.
Write to Tomi Kilgore at tomi.kilgore@wsj.com