Both the Dow and S&P 500 gained impressively on Tuesday led by a series of strong second-quarter earnings results. Corporate earnings across the board, especially the one delivered by Alphabet lifted investor’s confidence. However, Nasdaq Composite dropped marginally due to some profit taking, as lingering tariff issues and geopolitical conflicts continue to hurt investor sentiment.
The Dow Jones Industrial Average (DJI) closed at 25,241.94, increasing 0.8% or 197.65 points. The S&P 500 Index (INX) gained 0.5% to close at 2,820.40. However, the Nasdaq Composite Index (IXIC) closed at 7,840.77, shedding 1.10 points. A total of 6.57 billion shares were traded on Tuesday, higher than the last 20-session average of 6.1 billion shares. Decliners outnumbered advancers on the NYSE by 1.07-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 2.08-to-1 ratio. The CBOE VIX decreased 1.7% to close at 12.41.
How Did the Benchmarks Perform?
The Dow gained 0.8% reversing its losing streak of three straight trading days. Notably, 23 components of the 30-stock blue-chip index closed in the green, 6 traded in the red while 1 remained unchanged.
The S&P 500 rose 0.5% led by 1.3% increase in Materials Select Sector SPDR (XLB) and Energy Select Sector SPDR (XLE), 0.9% gain in Health Care Select Sector SPDR (XLV) and 0.7% increase in Communication Services Select Sector SPDR (XLC). Notably, the broad-market index closed at its highest since Feb .1. Nine out of 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq Composite declined marginally by 1.10 points after hitting its all-time high of 7,929 points during trading session.
Robust Earnings Momentum
The second-quarter 2018 earnings season has been a robust one so far.
Alphabet Inc.’s GOOGL non-GAAP earnings of $11.75 in the second quarter of 2018 surpassed the Zacks Consensus Estimate of $9.51. Total revenues came in at $26.2 billion, beating the Zacks Consensus Estimate of $25.64 billion. (Read More)
Verizon Communications Inc. VZ came out with quarterly earnings of $1.20 per share, beating the Zacks Consensus Estimate of $1.14 per share. The company posted revenues of $32.20 billion surpassing the Zacks Consensus Estimate $31.72 billion. (Read More)
United Technologies Corp. UTX came out with quarterly earnings of $1.97 per share, beating the Zacks Consensus Estimate of $1.85 per share. The company posted revenues of $16.71 billion surpassing the Zacks Consensus Estimate $16.26 billion. (Read More)
Consequently, shares of Alphabet, United Technologies and Verizon Communications were up by 3.9%, 3.8% and 1.5%, respectively. Strong performance of Alphabet also lifted share prices of other FAANG stocks. Alphabet carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Trade Conflicts Linger
Trade related conflicts, which commenced in March due to President Trump’s imposition of tariffs on imported steel and aluminum, are showing no signs of subsiding. On Jul 24, Trump tweeted "Tariffs are the greatest!" explaining that they are effective bargaining tools in the hands of United States to snatch better trade agreements from major trading partners.
Trump's chief economic advisor, Larry Kudlow also stated that tariffs could be effective in establishing a level playing field in global trade arena. Meanwhile, on Jul 24, the U.S. government launched a $12 billion emergency plan to aid farmers and agriculturists impacted by retaliatory tariffs.
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