U.S. stocks trade higher with Microsoft and Alphabet earnings ahead

U.S. stocks were trading higher Tuesday afternoon, helped by stronger than expected results from several blue chip companies with earnings reports from Alphabet and Microsoft due after the close.

How stocks are trading

  • The Dow Jones Industrial Average
    rose 235 points, or 0.7%, to 33,169

  • The S&P 500
    added 28 points, or 0.7%, to 4,245

  • The Nasdaq Composite
    climbed 101 points, or 0.8%, to 13,119

On Monday, the Dow Jones Industrial Average fell 191 points, or 0.58%, to 32936, the S&P 500 declined 7 points, or 0.17%, to 4217, while the Nasdaq Composite gained 35 points, or 0.27%, to 13018.

What’s driving markets

The Dow may break a four-day losing streak with help from earnings reports.

General Electric

and General Motors

were among the companies releasing results before the opening bell. After the close, Microsoft

and Texas Instruments

will release their earnings.

About 30% of S&P 500 companies are slated to report this week, with the earnings season so far been better than Wall Street expected. About 23% of S&P 500 companies have already reported earnings, and 77% of them have posted earnings surpassing analysts’ expectations, according to FactSet.

“It’s all about earnings,” in Tuesday’s trading day, said Kent Engelke, chief economic strategist and managing director at Capitol Securities Management. What’s especially reassuring for investors is what companies are — and are not — saying in their forward guidance, he noted. “We’re not reading about inflation killing margins. The forward-looking statements aren’t like ‘this is it and tomorrow is going to be bad,” Engelke said.

Louis Navellier, chairman and founder of Navellier & Associates, said Tuesday that “if the rest of the earnings season goes as well as early announcements have gone, especially by consumer-facing companies, we will be well positioned for a decent Christmas rally going into year-end.”

Read also: Alphabet earnings: What to expect from the Google parent

Meanwhile, in U.S. economic data the S&P flash U.S. services-sector index increased to 50.9, up from 50.1, to a three-month high. The S&P U.S. manufacturing-sector index reached 50, up from 49.8 or a six month high. Numbers above 50 signal expansion in a sector.

See: U.S. economy gets off to good start in the fourth quarter, S&P finds, as inflation cools

“Sentiment has improved in part due to hopes of interest rates having peaked, something which looks increasingly likely given the further cooling of inflationary pressures,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Investors remain wary of the Treasury market though.

The 10-year Treasury yield
fell another 1.2 basis points to 4.835% on Tuesday, following its Monday decline.

“Supply demand imbalances have everyone focused on how demand is holding up from these Treasury auctions,” said Edward Moya, Senior Market Analyst at Oanda. “Next week’s Treasury refunding announcement could be important as they could reduce auctions at the long end of the curve as they are concerned about the recent moves with yields. “

Reviving an equity rally may require not just further declines in yields but also additional support from the ongoing third quarter corporate earnings reporting season analysts said.

“Overall, I suspect that a bottoming in both equities and Treasuries will be a process this week, and the fact that 1/3 of the S&P 500 reports earnings this week might help to aid in stabilization,” said Mark Newton, head of technical strategy at Fundstrat.

Companies in focus

— Jamie Chisholm contributed.

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