FILE - In this Oct. 8, 2019, file photo trader Mark Puetzer, center, works on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Tuesday, Oct. 15. (AP Photo/Richard Drew, File)

Stocks march higher following solid earnings reports

October 15, 2019 - 12:32 pm

Stocks notched solid gains on Wall Street Tuesday as investors welcomed surprisingly good quarterly results from some of the nation's biggest companies.

Strong earnings from UnitedHealth Group, JPMorgan Chase and other companies helped lift the market, erasing modest losses from a day earlier. Investors are looking to the wave of quarterly report cards due out over the next few weeks to give them a clearer picture of what impact the trade war between the U.S. and China is having on corporate profits and the broader economy.

Health insurers were among the biggest gainers in the S&P 500 after UnitedHealth Group raised its annual financial forecast following third-quarter results that beat Wall Street's expectations.

Chipmaker Nvidia led technology sector stocks higher, climbing 5.5%.

Solid financial results from JPMorgan Chase and Charles Schwab helped drive gains in financial stocks.

Bond prices fell. The yield on the 10-year Treasury rose to 1.77% from 1.75% late Friday. Bond markets were closed Monday for Columbus Day.

Utilities, real estate companies and makers of consumer goods all fell as investors regained an appetite for more risk. The sectors are considered safe-play holdings and usually lag the market when investors are more confident.

Investors are in for a busy few days for corporate earnings. United Airlines Holdings was due to report its results later Tuesday, providing traders an early glimpse into the health of the airline industry.

Banks continue their earnings reports on Wednesday, with Bank of America and PNC Financial. Railroad giant CSX, Netflix and IBM will also report results on Wednesday.

KEEPING SCORE: The S&P 500 index was up 1.1% as of 3:26 p.m. Eastern time. The Dow Jones Industrial Average rose 272 points, or 1%, to 27,059. The Nasdaq gained 1.3%. Small-company stocks also bounced back after leading the decline a day earlier. The Russell 2000 index was up 1.1%.

ANALYST'S TAKE: Early earnings reports are giving investors a strong shot of confidence and, for now at least, overriding concerns about whether Washington and Beijing will be able to work out a trade deal.

Washington and Beijing agreed to a truce Friday. The U.S. agreed to suspend a planned hike in tariffs on $250 billion of Chinese goods that had been set to kick in Tuesday. Beijing, meanwhile, agreed to buy $40 billion to $50 billion in U.S. farm products.

The U.S. did not, however, cancel plans for more tariffs in December and the sticking points of intellectual property and trade secrets still hang over the dispute.

"There really isn't any pen to paper, it's just people talking and nothing definite," said JJ Kinahan, chief market strategist for TD Ameritrade. "The earnings are definite."

More importantly, the latest batch of earnings came with a spate of surprisingly good forecasts for the rest of the year, which is helping to ease concerns about a trade war-induced slowdown.

"That was what everybody was afraid of," Kinahan said. "Instead, we got 'no, the future looks good.'"

EARNINGS WORRIES: The early batch of upbeat financial reports come amid broader concerns for another rough round of quarterly earnings reports as a wide range of industries absorb the impact of ongoing trade disputes and growing economic uncertainty. Corporate earnings are expected to contract by nearly 5% during the third quarter, according to FactSet.

The dire prediction could soften as more companies report earnings. Similar forecasts were made ahead of both the first and second quarter reporting periods and companies in the S&P 500 managed to deliver only a modest contraction each time.

HEALTHY FORECASTS: UnitedHealth Group jumped 8.5% after it hiked its 2019 profit forecast. The nation's largest health insurance company said the addition of hundreds of clinics to its health care services business helped drive revenue and profit during the third quarter, both of which beat Wall Street forecasts.

Other health insurers were trading higher: Anthem gained 6.3%, Cigna added 6% and Humana rose 4.5%.

Johnson & Johnson, the world's biggest maker of health care products, gained 1.7% after it raised its profit forecast for the year following solid third quarter results. The company cited higher sales of key medicines for cancer and immune disorders.

BANKS AT BAT: JPMorgan Chase rose 3.3% after the bank beat Wall Street's third quarter profit forecasts on growth from higher interest rates and solid performance from its investment banking business.

Other major banks reported mixed results. Goldman Sachs recovered from an early slide, adding 0.5%. The bank reported a dive in third quarter profits on losses from some of its public investments as it struggled to drum up advisory business.

Citigroup gained 2.1%, while Wells Fargo rose 2.2%.

OVERSEAS: Major stock indexes in Europe closed mostly higher. The European Union said that a deal with Britain is still possible ahead of their expected separation on Oct. 31. The trading bloc said that Britain needs to move ahead with more compromises to seal an agreement.

Markets in Asia ended mixed.