Earnings Rejuvenate Wall Street, Stocks Close at Session Highs

Markets Dow Jones Newswires

U.S. stocks extended gains in afternoon trading Tuesday, with riskier corners of the market leading benchmarks higher.

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The Dow Jones Industrial Average gained 90 points, or 0.5%, to 16908. The S&P 500 added 13 points, or 0.6%, to 1974 and the Nasdaq Composite Index rose 58 points, or 1.3%, to 4544.

Investors were moving back into areas that are seen as riskier, traders said, after they fled some of those sectors during steep stock-market declines earlier this month. Small-cap stocks, energy shares and technology stocks posted the strongest gains, and safe-haven investments such as Treasurys and utility stocks declined. Traders said that investors were feeling more confident after stronger-than-expected corporate earnings reports and an upbeat reading on consumer confidence.

"The tunnel vision is off...once your scope gets bigger, the fear subsides over this recent downturn in the market," said Jonathan Corpina, senior managing partner at brokerage firm Meridian Equity Partners.

So-called momentum stocks outpaced the broader market's rise. The small-cap Russell 2000 Index, which has trailed broader benchmarks in recent months, rallied 2.1%. The Nasdaq was bolstered by an advance in biotechnology and social-media stocks, with the Nasdaq Biotechnology Index advancing 1.1%.

"People have woken up to the fact that maybe global growth isn't going to collapse," said Mark Luschini, chief investment strategist for Janney Montgomery Scott, which helps oversee $58 billion in assets. He added that short-term investors had bet on further declines in some of those riskier sectors, and said traders could be unwinding those bets.

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Among large-cap stocks, two sectors that set the early-October declines led benchmarks higher. Energy shares were the biggest gainers in the S&P 500, with the sector advancing 1.5%. And the Dow Jones Transportation Average jumped 1.1%, reaching a record high intraday.

Investors are also looking ahead to a statement from the Federal Reserve, due out Wednesday at the end of its two-day meeting. The central bank is expected to end its bond-buying program, but traders say they will be closely watching the central bank's outlook for short-term interest rates.

In economic news, an upbeat reading on consumer confidence outshined a surprise decline in durable-goods orders. Consumer confidence rose to 94.5 in October, according to the Conference Board, while a slide to 87.9 was expected. Orders for durable goods unexpectedly fell 1.3% in September, marking the second consecutive month of declines, the Commerce Department said. A rise of 0.7% was expected.

Third-quarter earnings reports from companies have been better than expected in recent sessions. With 213 companies reporting, the S&P 500 is on pace to grow earnings 5.6% in the third quarter, above the 4.5% expected before the start of reporting season.

"Even with European [economic] data deteriorating, these companies' earnings are able to keep grinding higher," said Michael Purves, chief global strategist at Weeden Co. "That's a very important sign here."

On Tuesday, Pfizer Inc. reported third-quarter results that beat analysts' estimates. The company also tightened its profit and revenue outlook for the year. Still, shares slipped 0.4%.

DuPont Co. said earnings jumped 52% in its third quarter on lower expenses. While that beat Wall Street's forecasts, the chemical company's shares were little changed.

A broad advance in European stocks helped set a positive tone early in the session. The Stoxx Europe 600 gained 0.9% in relatively light trading.

In other economic news, a report on home prices in 20 U.S. cities from S&P/Case-Shiller was nearly in line with expectations, showing a rise of 5.6% in August, while economists forecast a rise of 5.7%. A report on manufacturing in the mid-Atlantic region beat forecasts, as the Federal Reserve Bank of Richmond's manufacturing index rose to 20 in October, while a slide to 10 was expected.

In commodity markets, crude-oil futures gained 0.1% to $81.08 a barrel. Gold futures were little changed at $1229.00 an ounce.

Demand for safe-haven U.S. government debt declined, pushing the yield on the 10-year Treasury note up to 2.279% from 2.257% on Monday.

In other earnings news, Aetna Inc. lifted its earnings outlook for the year and reported third-quarter results that beat expectations. But shares fell 2.8%. The stock is up 12% so far this year.

Twitter Inc. said Monday it added 13 million monthly active users in the third quarter, up 4.8%. That is a slower pace than the 6.3% added in the previous quarter. The slowing user growth overshadowed Twitter's revenue, which more than doubled in the quarter and prompted an increase in full-year guidance. Shares sank 9.3%.

Coach Inc. reported a decline in profit and sales in the latest quarter, with a slump in North American sales offsetting sales gains internationally. Results topped expectations, but shares fell 6.3%.

Whirlpool Corp. said its profit rose 17% in the third quarter as sales increased 3%. While results came in below analysts' expectations, shares gained 7%.

Write to Alexandra Scaggs at alexandra.scaggs@wsj.com