Wall St. rallies on earnings optimism

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., October 17, 2016. REUTERS/Lucas Jackson

Wall Street rallied on Tuesday in the wake of a host of solid earnings reports that put corporate profits on track to snap a four-quarter streak of declines.

Of the 52 S&P 500 companies that have reported results to date for the third quarter, 81 percent have reported earnings that topped average analyst estimates, according to Thomson Reuters I/B/E/S.

Third-quarter earnings are now expected to show growth of 0.2 percent, which would mark an end to the U.S. profit recession that began in the third quarter of 2015. If the quarter stays on track, it will be the first time since the fourth-quarter of 2014 in which both earnings and revenue of S&P 500 companies increased.

“We are off to a great start, I don’t think the ultimate conclusion will be as good as the start has been,” said Stephen Massocca, Chief Investment Officer at Wedbush Equity Management LLC in San Francisco.

Massocca cautioned, however, that it was still early in the earnings season. “You have all these companies yet to report. That is really when the dance is going to start.”

The Dow Jones industrial average .DJI rose 97.35 points, or 0.54 percent, to 18,183.75, the S&P 500 .SPX gained 16.29 points, or 0.77 percent, to 2,142.79 and the Nasdaq Composite .IXIC added 58.44 points, or 1.12 percent, to 5,258.26.

Gaines were broad, with each of the 11 major S&P sectors in positive territory, led by a 1.2-percent gain in healthcare .SPXHC, boosted by a UnitedHealth’s (UNH.N) 7-percent jump after quarterly results and forecast.

Gains in the sector were curbed by a 2.5-percent decline in Johnson & Johnson (JNJ.N), while Pfizer (PFE.N) gained 1.1 percent on plans to ship a cheaper biosimilar to Remicade, JNJ’s top selling product. The news overshadowed J&J’s slight earnings beat.

Netflix (NFLX.O) was the biggest gainer on the S&P 500, rising nearly 20 percent after posting quarterly results and much higher-than-expected subscriber growth.

Goldman Sachs (GS.N) rose 2 percent after the bank’s results blew past Wall Street estimates, mirroring the performance of its Wall Street peers and helping lift the NYSE Arca Broker/Dealers index .XBD 1.4 percent.

Among the decliners, IBM (IBM.N), fell 2.7 percent after reporting its 18th straight quarter of revenue decline. Intel (INTC.O), scheduled to report after markets close, rose 1.5 percent on a Barclays upgrade. Yahoo (YHOO.O), also due to report in the evening, climbed 1.3 percent.

Advancing issues outnumbered declining ones on the NYSE by a 4.24-to-1 ratio; on Nasdaq, a 2.26-to-1 ratio favored advancers.

The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 41 new highs and 52 new lows.