U.S. Stocks Rebound on Upbeat Earnings, Set for Monthly Gains

U.S. stocks rebound

-- Boeing rallies after earnings

-- Treasury yields rise ahead of Fed statement

U.S. stocks rebounded Wednesday following their worst two-day stretch in months, lifted by the latest round of corporate earnings.

Some investors said the drops earlier in the week were healthy following a rapid run-up in stocks that pushed major indexes to fresh records. They added that a positive earnings and economic backdrop remains intact following recent tax changes.

"I would expect these kinds of dips that we've seen over the past couple of days would be buying opportunities," said Shannon Saccocia, chief investment strategist at Boston Private.

The Dow Jones Industrial Average rose 122 points, or 0.5%, to 26199, after advancing as much as 261 points earlier in the session. The S&P 500 climbed 0.1% and the Nasdaq Composite added 0.2%.

Even with recent declines, the Dow industrials and S&P 500 were on track for their largest one-month percentage gains in more than 18 months.

Boeing shares added 5.2%, contributing more than 120 points to the Dow industrials, after the aerospace giant forecast a higher profit margin and a big rise in cash generated from record jetliner deliveries.

Shares of Electronic Arts rose 7.2% after posting sharp growth in live services revenue in the holiday quarter, while Xerox gained 5.5% after shrinking its loss and sealing a deal in which Japan's Fujifilm Holdings will take a majority stake.

Health insurer Anthem was also among the S&P 500's best performers. The firm exceeded sales and profit expectations in the most recent quarter.

Technology heavyweights Facebook and Microsoft are scheduled to report earnings after the market closes Wednesday.

A recent rise in Treasury yields that raised some investor concerns about higher inflation and less accommodative central-bank policy continued Wednesday. The yield on the benchmark 10-year U.S. Treasury note climbed to 2.737%, according to Tradeweb, from 2.725% Tuesday -- its highest settlement since April 2014. Yields rise as bond fall.

Investors were parsing President Donald Trump's first State of the Union address and awaiting a Federal Reserve statement following the conclusion of its two-day meeting. This week's meeting is Chairwoman Janet Yellen's final meeting as leader of the central bank. The Fed is expected to leave interest rates unchanged but could offer fresh clues about its 2018 outlook.

While stocks and bond yields have often climbed together in the past, some analysts have said a rapid move higher in yields can hurt steady dividend-payers in the stock market and trigger wider concerns about risky assets.

Since the Fed's last meeting, the labor market has remained strong, the dollar has weakened and commodity prices have risen, which combined should point to tighter monetary policy ahead, analysts say.

"What we're reckoning with here is the end of this era of very easy money," said Kathy Jones, chief fixed income strategist for Schwab Center for Financial Research. The market still has some room to price in more interest-rate increases in the coming years to match the Fed's projections, she noted.

Elsewhere, the Stoxx Europe 600 swung between small gains and losses and closed down 0.2% following its biggest daily fall of the year. Declines from telecommunications-equipment maker Ericsson, fashion retailer Hennes & Mauritz and U.K. outsourcing group Capita -- which shed 43% after suspending its dividend and issuing a profit warning -- helped offset gains in Swedish household-appliance maker Electrolux.

Earlier, Hong Kong's Hang Seng rose 0.9% to cap off its best month since April 2015. Japan's Nikkei ended down 0.8% as the yen strengthened against the dollar.

--Kenan Machado contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

January 31, 2018 12:49 ET (17:49 GMT)