Strong earn­ings drive stocks up

The Fed­eral Re­serve took a pause in its slow-mov­ing cam­paign to lift in­ter­est rates.

The Denver Post - - BUSINESS - By Stan Choe

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 slow­mov­ing cam­paign to lift in­ter­est rates, as Trea­sury yields sank lower.

The Stan­dard & Poor’s 500 in­dex edged up by 0.70 points, or less than 0.1 per­cent, to 2,477.83 and added a whis­per 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 small­er­com­pany 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 mas­sive $4.5 tril­lion bal­ance sheet it built up fol­low­ing 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, drops for Trea­sury yields ac­cel­er­ated, and the 10year 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 fol­low­ing 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.

Boeing was the top-per­form­ing stock, and it had its best day in more than eight years af­ter it raised its fore­cast for earn­ings this year and re­ported bet­ter-than-ex­pected earn­ings for the se­cond quar­ter. It jumped $20.99, or 9.9 per­cent, to $233.45.

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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