Strong earnings drive stocks up
The Federal Reserve took a pause in its slow-moving campaign to lift interest rates.
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.