Corporate earnings lift stocks to more record highs

U.S. stock indexes returned to record highs Tuesday as corporate profits continued to come in better than analysts expected.

McDonald’s and Caterpillar were among the big companies that reported healthier-than-forecast results. Jumps in prices for oil, metals and other commodities helped lift companies that produce energy and raw materials. That more than offset losses for healthcare companies and stocks that pay relatively big dividends, which were hurt by a rise in Treasury yields.

The Standard & Poor’s 500 rose 7.17 points, or 0.3%, to an all-time high of 2,477.08. It was the first gain for the index in four days.

The Dow Jones industrial average rose 100.26 points, or 0.5%, to 21,613.43. The Nasdaq composite edged up 1.37 points, or less than 0.1%, to 6,412.17, and the Russell 2000 index of small-cap stocks climbed 12.33 points, or 0.9%, to 1,450.39. Both the Nasdaq and Russell set records.

Leading the way were energy stocks, which benefited from a second strong day for the price of oil. Benchmark U.S. crude rose $1.55, or 3.3%, to settle at $47.89 a barrel. Brent crude, the international standard, climbed $1.60, or 3.3%, to $50.20 a barrel.

Energy stocks in the S&P 500 climbed 1.3%, tied for the biggest gain among the 11 sectors that make up the index. Devon Energy rose 3.9% to $32.98. Marathon Oil rose 3.9% to $12.34.

Financial stocks also were strong after a pickup in interest rates raised expectations that banks could charge more for loans and pocket bigger profits.

The yield on the 10-year Treasury note climbed to 2.32% from 2.26%. The two-year yield climbed to 1.38% from 1.36%, and the 30-year yield rose to 2.91% from 2.83%.

The rise in yields came as the Federal Reserve began a two-day policy meeting on interest rates. The central bank already has raised rates three times since December, but few investors expect it to announce another move Wednesday. Most expect the next rate increase to come later this year.

It may not have shown Tuesday, but many investors are bracing for markets to get shakier as the Federal Reserve moves farther away from record-low interest rates and big economic stimulus. Contrarians also are worried about how much the stock market has climbed, and how smooth the ride has been, as expectations have built up this year that corporate profits will keep piling higher.

“There’s a lot of hope built into the market at current levels,” said Rob McIver, portfolio manager at the Jensen Quality Growth fund. “We’re cautioning investors to be cautious and conservative.”

Technology stocks have been the year’s biggest stars so far, as investors have been hungry for anything with the potential to grow quickly in a slow-growing global economy. But tech stocks in the S&P 500 slipped 0.2% on Tuesday after several of those companies reported results that fell short of expectations.

Seagate Technology, for example, sank 16.5% to $33.20 after the maker of hard drives and other electronic data storage reported weaker revenue and earnings than analysts had forecast. Alphabet, the parent of Google, fell 2.9% to $969.03.

On the opposite side was Caterpillar, which jumped 5.9% to $114.54 after reporting better results for the latest quarter than expected. It also raised its forecast for full-year revenue and profit, citing increased demand across many of its markets.

McDonald’s rose 4.8% to $159.07 after its quarterly revenue and earnings beat Wall Street’s forecast. The burger chain has been drawing in customers with a new line of premium burgers and $1 sodas.

Barnes & Noble soared 16.9% to $8.30 after Sandell Asset Management said it has taken a stake in the book retailer and is urging it to go private.

In the commodities market, natural gas rose 5 cents to $2.94 per 1,000 cubic feet, heating oil rose 5 cents to $1.57 a gallon and wholesale gasoline rose 4 cents to $1.60 a gallon.

Metals prices also climbed, which helped to lift shares of mining companies and other raw-material producers. Copper jumped 11 cents, or 4%, to $2.85 a pound. Silver rose 10 cents to $16.54 an ounce. Gold slipped $2.20 to $1,252.10 an ounce.

The euro rose to $1.1652 from $1.1645. The dollar rose to 111.89 yen from 111.11 yen, and the British pound inched up to $1.3037 from $1.3036.

France’s CAC 40 climbed 0.7%, Germany’s DAX gained 0.5% and the FTSE 100 in London rose 0.8%.

Japan’s Nikkei 225 index slipped 0.1%. South Korea’s Kospi index fell 0.5%. The Hang Seng in Hong Kong was flat.

UPDATES:

2:30 p.m.: This article was updated with closing prices, context and analyst comment.

1:25 p.m.: This article was updated with the close of markets.

This article was originally published at 6:55 a.m.