NEW YORK, July 23 — US stocks rose today boosted by better-than-expected earnings and forecast raises from blue-chip companies including Coca-Cola and United Technologies, soothing concerns over the pace of economic growth.
Over the last 24 hours investors have reacted positively to a series of second-quarter reports, albeit often against expectations for profits, which have been lowered due to this year’s concerns over growth.
“Analysts notoriously underestimate how well these companies will do, and part of it is that companies intentionally lowball the analysts so that they can beat their estimates,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
Coca-Cola Co shares rose 4.9 per cent, the most among stocks listed on the Dow Jones index, after the fizzy drink maker beat quarterly earnings expectations and raised its full year organic revenue forecast.
Its gains pushed the consumer staples sector 0.9 per cent higher, the biggest gainer among the major S&P sectors.
Industrial conglomerate United Technologies Corp gained 1.6 per cent, after raising its full-year profit and sales outlook.
President Donald Trump and US congressional leaders reached a deal on Monday on a two-year extension of the debt limit and federal spending caps that would avert a feared government default later this year, but add to rising budget deficits.
“I think it is a very positive thing that they have reached a budget deal. That pushes concerns of a debt ceiling and the budget beyond the next presidential election, which is one less thing for the market to worry about,” Frederick said.
The overall profits of S&P companies are now estimated to rise about 1 per cent in the second quarter, according to Refinitiv IBES data, improving from estimates of a small decline earlier.
Putting a damper on sentiment, the International Monetary Fund lowered its forecast for global growth this year and next, warning that more US-China tariffs, auto tariffs or a disorderly Brexit could slow growth further.
Hopes that the Federal Reserve will adopt a looser monetary policy have helped Wall Street’s main indexes scale new record levels, and put the S&P 500 just about 1 per cent shy of its all-time high.
At 9.44am ET, the Dow Jones Industrial Average was up 115.45 points, or 0.42 per cent, at 27,287.35, the S&P 500 was up 10.73 points, or 0.36 per cent, at 2,995.76. The Nasdaq Composite was up 23.76 points, or 0.29 per cent, at 8,227.89.
The European Central Bank is expected to cut interest rates on Thursday by 10 basis points and the Fed, which will meet a few days later, is widely expected to lower rates by at least 25 basis points.
Travellers Cos Inc was down 1.1 per cent after the insurer missed estimates for second-quarter profit, as weather-related losses led to an 18 per cent drop in underwriting gain.
Hasbro Inc jumped 6.2 per cent and was the biggest gainer among S&P 500 companies, after the toymaker reported better-than-expected quarterly revenue.
Advancing issues outnumbered decliners for a 2.41-to-1 ratio on the NYSE and a 1.40-to-1 ratio on the Nasdaq.
The S&P index recorded 13 new 52-week highs and two new lows, while the Nasdaq recorded 27 new highs and 38 new lows. — Reuters