Dow Industrials Surge on Strong Earnings from Caterpillar, 3M

By Michael Wursthorn and Georgi Kantchev Features Dow Jones Newswires

U.S. stocks rise as strong earnings support major indexes

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-- Caterpillar, 3M boost Dow industrials

-- Shares in Europe edge lower, while Asia stocks rise

The Dow Jones Industrial Average surged Tuesday, as robust corporate earnings helped put the blue-chip index on track for another record close.

The Dow industrials gained 196 points, or 0.8%, to 23472 in recent trading. The S&P 500 rose 0.2%, while the Nasdaq Composite added 0.3%.

Better-than-expected earnings results from Caterpillar and 3M among others helped support major indexes after stocks had fallen a day earlier. Strong results from U.S. companies, as well as solid economic growth around the world, have underpinned stock markets and helped push them to record highs.

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"We continue to see a strong improvement in earnings," said Celia Dallas, chief investment strategist at Cambridge Associates. While valuations continue to be a concern, Ms. Dallas cautioned that investors shouldn't limit their exposure U.S. stocks too much yet. "U.S. equities tend to be more defensive when you get into periods of stress," relative to stocks elsewhere in the world, she said.

Shares of Caterpillar jumped 4.8% after the company posted stronger-than-expected revenue and profit growth and boosted its outlook for the year.

Meanwhile, 3M, the maker of Post-it Notes, Ace bandages and Scotch-Brite cleaning pads, reported higher profit and revenue that exceeded analysts' expectations, while also raising its outlook. Shares of 3M rose 7.6%.

Together, the two companies contributed more than 150 points to the Dow industrials' gain.

About 24% of the companies in the S&P 500 have reported actual results for the third quarter so far, with this week slated to be one the busiest, according to FactSet. By the end of Friday, more than half of the major index's companies will have reported results for the most recent quarter, FactSet says.

"There's still room left for equities to move higher," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co. "It'll just be at a lesser pace."

Central banks are another focus for investors this week. The European Central Bank is expected to announce changes to its massive bond-buying program after its meeting Thursday. Economists expect the ECB to reduce its monthly asset purchases, possibly by half, but also to extend the program for a number of months into 2018.

Investors "need to exercise caution as markets enter a different phase with less central bank support than has been the case over the past decade," said David Simner, portfolio manager at Fidelity International.

U.S. President Donald Trump is also expected to unveil his pick for the new leader of the Federal Reserve within the next 10 days from a roster of candidates that include current Fed Chairwoman Janet Yellen.

A hawkish candidate might send U.S. Treasury yields higher and boost the dollar, analysts say. The yield on the 10-year U.S. Treasury note rose to 2.410%, according to Tradeweb, from 2.375% Monday. Yields rise as prices fall.

In currencies, the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.2%.

Elsewhere, the Stoxx Europe 600 index fell 0.4%. The Shanghai Composite Index finished up 0.2%. Japan's Nikkei Stock Average extended its record-setting streak of daily gains to 16 by closing up 0.5%.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

(END) Dow Jones Newswires

October 24, 2017 12:53 ET (16:53 GMT)