U.S. equities traded higher Tuesday after a slew of major companies reported better-than-expected quarterly results.
The S&P 500 gained 0.4 percent to hit a record high, with financials, materials and energy rising more than 1 percent to lead advancers. The Dow Jones industrial average rose 138 points, with Caterpillar and McDonald’s contributing the most gains. The Nasdaq composite rose 0.2 percent and hit a record high.
Caterpillar posted bottom-line results that topped estimates, sending its shares higher.
“This is what the market needs to hear from industrial names coming in strong,” said Quincy Krosby, chief market strategist at Prudential Financial. “This is the earnings week.”
General Motors and McDonald’s also saw their shares climb after reporting quarterly results. However, 3M posted weaker-than-expected results, sending the stock down 6 percent. Shares of 3M shaved off 63 points from the Dow.
This is the busiest week of the earnings season, with approximately 180 S&P 500 components scheduled to report. Boeing, Coca-Cola, Facebook and Amazon are set to report later this week.
“The majority of companies that have reported have beaten” the Street, said Nick Raich, CEO of The Earnings Scout. “If there is a negative in these numbers, and this was expected, is that the earnings growth rate has declined from the first quarter.”
Wall Street also set its sights on the Federal Reserve, as the central bank kicked off a two-day monetary policy meeting. The Fed is largely expected to keep interest rates unchanged. However, investors will parse their statement for clues about the unwinding of their $4.5 trillion balance sheet.
“Stocks should keep pushing upward until the FOMC makes the unprecedented decision to pare its balance sheet, but the pace of the ascent should slow,” said Jeremy Klein, chief market strategist at FBN Securities.
“Those investors who have the ability to capture short term market movements should position themselves in anticipation of an extension of the rally while those who can only shift their portfolios in a manner similar to a tanker turning around in the Hudson River should start to tread more cautiously,” Klein said.
In economic news, major metro area home prices rose 5.7 percent in May, according to the S&P CoreLogic Case-Shiller home price index. Consumer confidence data for July analyst expectations.
The benchmark 10-year note yield rose to trade at 2.32 percent, while the two-year yield hovered around 1.389 percent.
“The focus is on earnings because there isn’t much more to focus on. I think the market is discounting the fact that the Fed won’t raise rates tomorrow,” said Bob Phillips, managing principal at Spectrum Management Group. “They might raise once more this year, but … the economy hasn’t really met growth expectations since the first quarter.”