Stocks Climb, Led by Gains in Technology

NEW YORK (AP) -
Traders work on the floor of the New York Stock Exchange on Wednesday. (Reuters/Brendan McDermid)
Traders work on the floor of the New York Stock Exchange on Wednesday. (Reuters/Brendan McDermid)

Stock indexes rose in afternoon trading Wednesday after companies reported profits that were stronger than expected, if not strong. Technology stocks led the way following an encouraging report from Microsoft.

KEEPING SCORE: The Standard & Poor’s 500 index was up 12 points, or 0.5 percent, to 2,176 at 2:30 p.m. Eastern time. The Dow Jones Industrial Average rose 58, or 0.3 percent, to 18,617. The Nasdaq composite rose 61, or 1.2 percent, to 5,097.

RECORDS ON REPEAT: If the day’s gains hold, the S&P 500 and Dow will again set record highs. The Dow would also mark its ninth straight day of gains, its longest streak since 2013.

“The problem is: Where do we go from here?” asked Randy Frederick, managing director of trading and derivatives at Charles Schwab. “I have the tendency to believe the upside is somewhat limited,” in part because stock prices have been rising faster than corporate earnings in recent years.

The S&P 500 trades at about 18.5 times earnings over the last 12 months. Over the last 15 years, its average price-earnings ratio is 15.7.

CLOUD COVER: Microsoft surged $3.45, or 6.5 percent, to $56.54. The technology giant said it returned to a profit in its fiscal fourth quarter after reporting a loss a year earlier. Its earnings topped analysts’ expectations, and the company credited momentum in its cloud-computing business. Microsoft’s surge helped the technology sector rise 1.6 percent, much more than the rest of the market.

BIGGEST GAIN: Cintas was the top-performing stock in the S&P 500 after reporting quarterly results that beat Wall Street’s forecasts. The company, which provides uniforms, restroom supplies and other products for offices, surged $9.98, or 10.2 percent, to $107.38.

SURGING SURGICAL: Intuitive Surgical surged $36.91, or 5.5 percent, to $708.81, after the maker of robotic-assisted surgical systems reported revenue and earnings per share that both topped analysts’ expectations.

FOXED: Twenty-First Century Fox fell 58 cents, or 2.1 percent, to $27.16 amid widespread reports that its Fox News business will soon cut ties with its head, Roger Ailes. Fox News is a key profit maker for the company.

A LOW BAR: Analysts came into this earnings reporting season with low expectations, forecasting a roughly 5 percent drop for S&P 500 companies from a year earlier. That’s made it easier for companies to come in above forecasts.

Nearly two out of three companies so far this reporting season have come in above analysts’ profit expectations, according to S&P Global Markets Intelligence. That’s what usually happens, because analysts tend to lower their earnings forecasts for companies as each reporting season approaches.

Several reports on the U.S. economy have also come in better than expected in recent weeks, which has helped stock indexes reach record highs. The S&P 500 has jumped just over 8 percent since hitting a bottom on June 27 after the United Kingdom voted to leave the European Union.

NO FEAR: Calm in the markets meant less demand for gold and Treasurys, traditional go-to investments during periods of fear. The price of gold fell $13, or 1 percent, to $1,319.30 per ounce. The yield on the 10-year Treasury note, which moves in the opposite direction of its price, rose to 1.58 percent from 1.56 percent late Tuesday.

The VIX, an index that measures investors’ expectations of future volatility in the stock market, fell 1.5 percent and is close to its lowest level since 2014.

BABY STEPS: Since setting a record high last week, the S&P 500 has been making mostly small moves. The index has yet to have a day where it rose or fell by 1 percent since establishing its new high.

That’s a change from the end of June, when the S&P 500 swung at least that much in six straight days, with one particularly sharp drop of 3.6 percent.

DIVIDEND SLACK: The weakest areas of the stock market were the biggest dividend payers. Utilities fell 0.5 percent. It’s a turnaround from the trend that’s held for much of 2016, where high dividend-payers led the market as investors sought alternatives to low-yielding bonds.

ENERGY TURN: The price of crude rose after a government report showed that the amount of oil supplies held in inventories dropped last week. Benchmark U.S. crude rose 29 cents, or 0.6 percent, to close at $44.94 a barrel. It had been below $44 earlier in the day. Brent crude rose 56 cents, or 1.2 percent, to $47.22 in London.

Energy stocks were close to flat after being down as much as 1.1 percent earlier in the day.

OVERSEAS: European markets were mostly higher, while Asia’s day was mixed. Germany’s DAX rose 1.6 percent after Volkswagen reported earnings that were better than analysts were expecting. France’s CAC 40 climbed 1.1 percent, and Japan’s Nikkei 225 index dipped 0.2 percent.

CURRENCIES: The euro fell to $1.1004 from $1.1015 late Tuesday, and the British pound rose to $1.3162 from $1.3093. The dollar rose to 106.83 Japanese yen from 106.09 yen.