U.S. Stocks Climb, Driven by Strong Earnings Reports

By Riva Gold and Akane Otani Features Dow Jones Newswires

Caterpillar, McDonald's rise after earnings, boosting Dow industrials

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-- Bank stocks climb with bond yields; 10-year Treasury yield above 2.3%

-- Energy stocks follow oil prices higher; U.S. crude up roughly 3%

The Dow Jones Industrial Average climbed Tuesday, bolstered by a flurry of upbeat corporate earnings.

The blue-chip index added 118 points, or 0.6%, to 21631, on track for gains after three consecutive sessions of declines. The S&P 500 rose 0.4%, and the Nasdaq Composite added less than 0.1%.

Earnings reports are expected to drive much of the trading action this week, analysts say, with roughly 40% of S&P 500 firms scheduled to report quarterly results through Friday. Solid earnings should help major indexes keep climbing, although some investors say they worry stock gains will slow in the later months of the year.

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A rally in Caterpillar and McDonald's lifted the Dow industrials. Shares of Caterpillar gained 5.2% after the equipment giant raised its revenue and profit outlook for the year, while McDonald's shares jumped 4% after the fast-food chain's earnings topped analysts' expectations.

Stock indexes also received a boost from energy shares, which jumped 1.8% in the S&P 500, buoyed by a climb in oil prices. Energy stocks, the worst-performing sector in the S&P 500 this year, have come under pressure this year as oil prices have slid.

U.S. crude rose 3.2% to $47.80 a barrel Tuesday, extending gains from Monday, when Saudi Arabia -- the world's top oil exporter -- said it would limit oil exports in August.

Elsewhere, the Stoxx Europe 600 rose 0.4% after a measure of German business confidence climbed to a record high in July.

Banks, insurance companies and miners drove most of Europe's advance, as a modest rise in government bond yields supported financial shares, since such moves tend to boost lending income.

Government bonds fell as the Federal Reserve was set to begin its two-day policy meeting Tuesday. The yield on the 10-year U.S. Treasury note rose to 2.319%, according to Tradeweb, from 2.253% on Monday. Yields rise as bond prices fall.

Economists expect no change in interest rates at this juncture, though some have speculated that the central bank could announce the start date of its balance sheet runoff.

"I think there's a relatively low ceiling on where [policy] can go unless inflation kicks in," said John Maxwell, fund manager at Ivy Investments. "We don't have signs of inflation that need to be tamed."

The CBOE Volatility Index, which measures investors' expectations for swings in the S&P 500 over the next 30 days, extended losses Tuesday. The VIX was recently down 1.6% at 9.28, on track to close under 10 for its ninth consecutive session -- its longest such streak ever.

Earlier, Australia's S&P/ASX 200 added 0.7%, outperforming stock markets in the region. Major banks and mining companies advanced, while shares there drew some support from a climb in oil prices.

Indexes in Japan, Hong Kong and Taiwan were barely changed from Monday's closing levels, while South Korea's Kospi Composite Index fell 0.5% from a record high, snapping an eight-day winning streak.

Write to Riva Gold at riva.gold@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

July 25, 2017 12:51 ET (16:51 GMT)