Stocks rose Tuesday, with the Nasdaq moving closer to exiting bear-market territory, as investors continued to sort through corporate earnings while awaiting President Donald Trump’s State of the Union address in the evening.
What are major benchmarks doing?
The Dow Jones Industrial Average DJIA, +0.54% rose 95 points, or 0.4%, to 25,338, while the S&P 500 index SPX, +0.28% rose 3 points, or 0.1%, to 2,727. The Nasdaq Composite Index COMP, +0.58% gained 32 points, or 0.4%, to 7,379, inching closer to 7,431.50 which would officially mark its exit from a bear market.
What’s driving the market?
Stocks began the week on a positive note, with investors tying strength to earnings that were perceived as upbeat. Tech shares were instrumental in paving the way higher although Google parent Alphabet disappointed Monday evening after its quarterly results showed costs rising faster than expected.
Investors will continue to digest the latest round of earnings releases Tuesday, with earnings from Walt Disney Co. DIS, +0.55% and Snap Inc. SNAP, -1.59% due after the market close.
President Trump is set to deliver his State of the Union address Tuesday at 9 p.m. Eastern Time. Analysts said investors could prove more sensitive than usual to headlines surrounding the speech given market jitters over U.S.-China trade talks and the prospects of another government shutdown if the White House and congressional Democrats are unable to agree to a deal on funding for a southern border wall before the current stopgap funding measure runs out later this month.
Federal Reserve Chairman Jerome Powell dined Monday night with Trump and Treasury Secretary Steven Mnuchin. However, they didn’t discuss expectations for monetary policy, “except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook,” the central bank said in a statement.
Read: Fed’s Powell and Clarida have dinner with Trump, Mnuchin at White House
The U.S. services sector expanded at a slower pace in January, according to the Institute for Supply Management’s nonmanufacturing index, which fell from 58.0% in December to 56.7% last month, below economists’ expectations of a 57.4% reading, per a MarketWatch poll. A reading above 50% indicates an expansion in activity.
The Markit services PMI also registered a decline from 54.4 in December to 54.2 in January.
What are analysts saying?
The market continues to respond well to better-than-expected earnings, in addition to the Federal Reserve’s new, dovish outlook, Kevin Miller, chief investment officer of E-Valuator Funds told MarketWatch. “I don’t think people realized how much pressure the Fed was putting on markets by raising rates four times last year,” he said.
The U.S.-China trade dispute, however, remains the major headwind preventing the next leg higher, he said, but if investors do get good news on that front, “You’d better get in the market,” he said, arguing that a strong labor market will underpin the type of consumer demand that should keep the current expansion going beyond 2019.
“The speech is going to be closely monitored by investors, keen to get an update on trade talks with China and border security, or more specifically the wall, which led to the longest ever government shutdown last month and could trigger another in just over a week,” said Craig Erlam, senior market analyst at Oanda, in a note.
“There have been plenty of reports that Trump is considering using emergency powers to deliver on his promise of border wall funding and this could be the platform for it, or at least a strong hint of an intention to do so,” Erlam said.
Which stocks are in focus?
Alphabet GOOG, -0.05% GOOGL, -0.28% fell with the class A shares off 0.9% after the tech giant reported stronger-than-expected earnings but investors took exception to a sizable jump in spending.
Shares of Estée Lauder Cos. EL, +12.21% rallied 11% after the cosmetics company posted fiscal second-quarter earnings and sales beats and raised its full-year outlook.
Seagate Technology PLC STX, -0.94% fell 1.8%, failing to hold on to gains in the wake of better-than-expected quarterly results.
Shares of Church and Dwight Co. Inc. CHD, -7.33% skidded 7.6% after the consumer products company said that its profit fell 64% in the fourth quarter.
Lumentum Holdings Inc. LITE, -4.73% dropped 3.6% after the firm reported fiscal second-quarter earnings that missed expectations.
Ralph Lauren Corp. RL, +8.68% shares jumped 8.2% after the luxury lifestyle brand reported fiscal third-quarter earnings and revenue that beat expectations.
Shares of Pain Therapeutics Inc. PTIE, -9.61% tumbled 8.3% after the company issued an unusually critical statement concerning a recent meeting with the Food and Drug Administration to discuss its abuse-deterrent gel formulation of the painkiller oxycodone.
How are other markets trading?
Japan’s Nikkei 225 NIK, -0.19% closed slightly lower Tuesday, down 0.2%. Markets in much of the rest of Asia, including those in Korea, China, and Hong Kong were closed for the Lunar New Year holiday.
European stocks were higher, with the Stoxx Europe 600 SXXP, +1.41% rallying more than 1%.
In the commodities markets, crude oil CLH9, -1.50% prices were in retreat, while the price of gold GCH9, -0.01% were mostly flat and the U.S. dollar DXY, +0.22% traded slightly higher.
—William Watts contributed to this article
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