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Wall Street rises as investors bet on positive earnings season

3 minute read

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 18, 2021. REUTERS/Brendan McDermid

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  • J&J raises 2021 profit forecast after Q3 earnings beat
  • Insurer Travelers rises after beating profit estimates
  • Walmart up on entering GS 'conviction list'
  • P&G falls after warning on higher supply chain costs
  • Indexes up: Dow 0.31%, S&P 0.53%, Nasdaq 0.54%

Oct 19 (Reuters) - U.S. stock indexes rose on Tuesday with the biggest boosts from the technology and healthcare sectors as investors appeared to bet on solid quarterly reports even as some worried that it was too early to celebrate.

On track for a fifth straight session of gains, the benchmark S&P 500 index (.SPX) was less than 1% below its record high reached in early September.

Johnson & Johnson's (JNJ.N) shares were up more than 2% providing the biggest boost to the S&P's healthcare index (.SPXHC) after it raised its 2021 adjusted profit forecast, while insurer Travelers Cos Inc (TRV.N) added 2% after beating third-quarter profit estimates. read more

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High-profile techonology and communications companies were also big contributors to the S&P's gain with Apple Inc (AAPL.O), Facebook (FB.O) and Microsoft (MSFT.O) all rising.

But in the second week of earnings with a "very small sample" of releases, Steve Sosnick, chief strategist at Interactive Brokers worried about a possible pullback on the horizon.

"We're seeing volatility measures like the VIX flipping from nervous to complacent in a really short period of time," said Sosnick. "We may be a bit ahead of ourselves. The mostly likely scenario is that we make one more run at new S&P highs and then we pull back, subject to earnings."

The CBOE market volatility index (.VIX) was down 0.52 points at 15.79, after hitting its lowest level since mid-August.

Nine of the 11 major S&P 500 sector indexes were trading higher, with healthcare stocks (.SPXHC) taking the lead followed by utilities (.SPLRCU).

Analysts now expect S&P 500 earnings to rise 32.4% from a year earlier, according to Refinitiv data.

"The key for the market to going up from here will not be higher multiples, it will have to be higher earnings. That's why it's so important to pay attention to what those profit margins do going forward and what the trajectory of GDP looks like," said Eric Marshall, portfolio manager at Hodges Funds.

"Investors will be paying very close attention to pricing power, how companies are dealing with labor shortages and inflationary cost pressures within their business."

By 2:34PM ET, the Dow Jones Industrial Average (.DJI) rose 110.15 points, or 0.31%, to 35,368.76, the S&P 500 (.SPX) gained 23.8 points, or 0.53%, to 4,510.26 and the Nasdaq Composite (.IXIC) added 81.66 points, or 0.54%, to 15,103.47.

Netflix Inc (NFLX.O) shares were basically flat ahead of its quarterly results later in the day. Tesla Inc (TSLA.O) rose 0.2% ahead of its results on Wednesday, with investors watching for indications of its performance in China. read more

Procter & Gamble Co (PG.N) fell 1.2%, weighing on the S&P's consumer staples sector (.SPLRCS), as it warned that higher commodity and freight costs would take a bigger bite out of earnings.

However, Walmart Inc's (WMT.N) rose 2% after Goldman Sachs added the world's largest retailer to its "Americas Conviction List".

Atea Pharmaceuticals Inc (AVIR.O) plunged 61.6% after its antiviral pill, being developed with Roche (ROG.S), failed to help patients with mild and moderate COVID-19. read more

Drugmaker Merck & Co Inc (MRK.N), which has applied for U.S. authorization for its COVID-19 pill, rose 2.6% in response Pfizer Inc (PFE.N), due to report data on its antiviral as soon as this quarter, gained 1.8%.

Advancing issues outnumbered declining ones on the NYSE by a 1.31-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored advancers.

The S&P 500 posted 41 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 69 new highs and 60 new lows.

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Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru; Sinéad Carew in New York, Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Aurora Ellis

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