Profit post­ings nudge up stocks

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - STAN CHOE

NEW YORK — U.S. stock in­dexes inched fur­ther into record ter­ri­tory Wed­nes­day af­ter AT&T, Boe­ing and oth­ers joined the pa­rade of big com­pa­nies re­port­ing stronger prof­its than an­a­lysts ex­pected. Stocks that pay big div­i­dends were par­tic­u­larly strong af­ter the Fed­eral Re­serve took a pause in its slow-mov­ing cam­paign to lift in­ter­est rates, as Trea­sury-note yields sank lower.

The Stan­dard & Poor’s 500 in­dex edged up by 0.70 point, or less than 0.1 per­cent, to 2,477.83 and added a whisker to its record high set a day ear­lier.

The Dow Jones in­dus­trial av­er­age gained 97.58 points, or 0.5 per­cent, to 21,711.01, and the Nas­daq com­pos­ite rose 10.57 points, or 0.2 per­cent, to 6,422.75. Both are at record highs. The Rus­sell 2000 in­dex of smaller-com­pany stocks dipped 8.11 points, or 0.6 per­cent, to 1,442.28, and the New York Stock Ex­change was nearly evenly split be­tween stocks that rose and fell.

While an­nounc­ing its de­ci­sion to hold short-term rates steady, the Fed­eral Re­serve said that it may be­gin par­ing the $4.5 tril­lion bal­ance sheet it built up af­ter the fi­nan­cial cri­sis “rel­a­tively soon,” which some an­a­lysts took to mean as Septem­ber. The Fed also said that in­fla­tion looks to re­main be­low its tar­get of 2 per­cent in the near term.

Af­ter the Fed’s an­nounce­ment, yields on Trea­sury notes ac­cel­er­ated their de­cline, and the 10-year yield fell to 2.29 per­cent from 2.33 per­cent late Tues­day. The two-year yield sank to 1.35 per­cent from 1.39 per­cent.

Lower bond yields make the div­i­dends paid by stocks more at­trac­tive, and the big­gest div­i­dend pay­ers picked up mo­men­tum af­ter the Fed’s an­nounce­ment. Util­ity stocks in the S&P 500 climbed 0.9 per­cent, for ex­am­ple, more than dou­bling their gain af­ter the Fed’s de­ci­sion.

The best-per­form­ing area of the mar­ket was the tele­com sec­tor, which jumped af­ter AT&T re­ported stronger sec­ond-quar­ter earn­ings than Wall Street had fore­cast. Its stock rose $1.81, or 5 per­cent, to $38.03.

“We’ve seen some pretty strong re­sults from im­por­tant com­pa­nies,” said John Wil­son, se­nior eq­uity port­fo­lio man­ager at Columbia Thread­nee­dle. “They’re de­liv­er­ing very strong rev­enue and profit growth. That’s en­cour­ag­ing, es­pe­cially given the fact that mar­kets have had a pretty good move.”

The S&P 500 is al­ready up nearly 11 per­cent for the year on the ex­pec­ta­tion that cor­po­rate prof­its will con­tinue to rise, and the stronger prof­its help to val­i­date the big gains. Wil­son said he’s no­ticed some par­tic­u­larly en­cour­ag­ing com­ments from com­pa­nies about im­prove­ments they’ve seen in their Euro­pean busi­nesses.

Aka­mai Tech­nolo­gies fell to the sharpest loss in the S&P 500 de­spite re­port­ing bet­terthan-ex­pected sec­ond-quar­ter re­sults. It gave a fore­cast for third-quar­ter rev­enue and other mea­sures that were lower than an­a­lysts were ex­pect­ing, and its stock dropped $7.79, or 14.6 per­cent, to $45.49.

Health care stocks moved lower as in­vestors were dis­ap­pointed with sev­eral profit re­ports or fore­casts. Hos­pi­tal op­er­a­tor Uni­ver­sal Health Ser­vices dropped $10.02, or 8.2 per­cent, to $112.88 af­ter it cut its out­look af­ter a weak sec­ond quar­ter.

Bench­mark U.S. crude topped $48 per bar­rel for the first time in seven weeks. It climbed 86 cents, or 1.8 per­cent, to $48.75 per bar­rel. Brent crude, the in­ter­na­tional stan­dard, gained 77 cents to $50.97 per bar­rel.

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