US stocks rallied on Tuesday, as investors digested an array of earnings reports, a sharp jump in oil prices and waited for the Federal Reserve to conclude its policy meeting later on Wednesday.
Hopes of a rate cut, potentially offsetting slower earnings growth, have dulled bullish momentum on equity markets.
The Fed meeting is expected to reinforce expectations of little early change in policy.
The current pace of fourth quarter earnings growth suggests an average increase of about 10 per cent, down from 19 per cent during the third quarter.
“The fourth quarter should be seen as an important transition to a period of lower earnings,” said David Shairp, global strategist at JPMorgan Asset Management.
“Single-digit earnings growth remains consistent with respectable, if not stellar, equity market returns and the ongoing out-performance of equities against bonds,” he said.
At the close in New York, the S&P 500 had risen 0.6 per cent to 1,428.82, helped by a 2.1 per cent gain in energy stocks.
The Nasdaq Composite rose 0.3 per cent to 2,448.64. The Dow Jones Industrial Average rallied 0.3 per cent to 12,523.31.
Motorola shares jumped 6.9 per cent to $19.58 on news that Carl Icahn, the billionaire investor, was interested in joining the company’s directors.
The earnings season shifted into a higher gear on Tuesday. Mixed results and guidance from a number of companies sparked choppy trading.
US Steel rose 4.4 per cent to $80.27 as it beat quarterly estimates but warned that profit growth would slow this quarter.
3M reported fourth quarter results that beat forecasts, but the diversified manufacturing company said a slower global economy could lower its 2007 results.
Shares in 3M fell 5.4 per cent to $74.70.
UPS delivered fourth quarter earnings of $1.04 a share that matched estimates. Its shares fell 2.4 per cent to $72.70 as the company warned that growth could slow in 2007.
Procter & Gamble beat earnings forecasts, but its shares fell 0.45 per cent to $64.59.
Colgate-Palmolive also exceeded the expectations of analysts and its shares rose 1.1 per cent to $67.42.
Merck said fourth quarter profits fell 58 per cent and the results just missed forecasts. Its stock fell 1.3 per cent to $44.91.
US Airways and JetBlue, both returned to profitability during the fourth quarter, but investors sold shares after they rose in early trade. US Airways fell 2.4 per cent to $53.10 and JetBlue slumped 4.5 per cent to $13.85.
The Chicago Mercantile Exchange fell 1.3 per cent to $568.25, as a 33 per cent rise in quarterly profit missed estimates due to lower trading margins.
source:www.ft.com
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