U.S. Stocks Jump on Strong Corporate Results
By Michael Wursthorn and Georgi Kantchev
Transportation companies boosted major indexes Monday, as some strong corporate-profit reports helped investors look past simmering geopolitical tensions.
Old-economy companies, such as trucking firms and railroad operators, nudged the S&P 500 higher to help the broad index recoup the losses it suffered Friday.
Investors were drawn to those industrial stocks after J.B. Hunt Transport Services reported stronger-than-expected revenue for the first three months of the year, suggesting that the a key corner of the U.S. economy -- the movement of goods -- is humming along.
Investors are hoping the latest earnings season, which is expected to be one of the best in years, will help steady a stock market that has stalled and stumbled over the past two months.
Analysts predict companies in the S&P 500 will increase earnings by their widest margin in six years and say the benefits of the tax overhaul passed last year and a strong economic backdrop are expected to push profits higher. The better results should help markets "continue their longer-term trend of improving fundamentals," said Jason Pride, chief investment officer of Glenmede, which manages more than $40 billion in assets.
The Dow Jones Industrial Average gained 238 points, or 1%, to 24599. The S&P 500 added 0.9%, while the Nasdaq Composite rose 0.7%.
The Dow Jones Transportation Average, an index of 20 of the largest U.S. airlines, railroads and trucking firms, climbed 2.4%, its biggest gain in more than a month.
However, some investors worry that strong earnings reports may not give stocks that big of a bounce since valuations are still relatively high, even after the recent selloff helped pull down forward-earning multiples for the S&P 500. Meanwhile, the labor market is tight, which could prompt inflation to grow more quickly than expected and resource costs could soon become problematic, said Jim Paulsen, chief investment strategist of the Leuthold Group.
Several banks on Friday saw their share prices fall after reporting strong earnings, including JPMorgan Chase, for example.
"Solid corporate performance should help buffer the stock market against a severe collapse," said Mr. Paulsen. "However, for a host of reasons, investors should probably moderate upside expectations due to robust earnings results this year."
On Monday, though, investors appeared willing to temporarily put those concerns aside.
Shares of J.B. Hunt rose 6.4%, the most of any other stock in the S&P 500. Logistics firm C.H. Robinson Woldwide added 3.5%, while railroad operators Norfolk Southern and Kansas City Southern gained 1.5% each.
Stocks that are set to report earnings early Tuesday morning were also trading higher: UnitedHealth Group added 3.2%, while Goldman Sachs Group and Johnson & Johnson both added 1.1%.
Pharmacy stocks also got a boost after investors got a signal that Amazon.com may not be getting into the business of selling pharmaceutical products. Shares of CVS Health added 5%, while Walgreens Boots Alliance rose 4.1% after CNBC reported that Amazon put aside plans to get into the pharmaceutical space.
Shares of Amazon, meanwhile, rose 0.7%.
The expectations for stocks to get an earnings boost coincided with investors already breathing a sigh of relief after missile strikes late Friday by the U.S., U.K. and France on Syria didn't lead to a major escalation. A Pentagon official said that the single wave of strikes is complete for now, while in a Twitter post Saturday, President Donald Trump said "Mission Accomplished!"
"Uncertainties can escalate again, but so far the biggest fears haven't been realized, which allows risky assets to recover," said Viraj Patel, a strategist at ING Bank.
Elsewhere, the Stoxx Europe 600 fell 0.4% to snap a two-session winning streak, while Asian markets ended mixed.
The Hang Seng Index ended down 1.6%, while the Shanghai Composite Index of large-cap Chinese stocks fell 1.5%. Japan's Nikkei Stock Average finished up 0.3%.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and Georgi Kantchev at firstname.lastname@example.org