Stocks Rise on Optimism for Corporate Earnings
NEW YORK ( TheStreet) -- Major U.S. stock averages recorded firm gains Wednesday after Alcoa(AA) ushered in the earnings season with stronger-than-expected revenue amid Wall Street's increasingly subdued estimates on fourth-quarter corporate growth.
Constellation Brands (STZ) followed up on Alcoa's upbeat announcement with a solid quarterly release of its own.
Earnings season is expected to kick into high gear next week as the big banks release their quarterly results. Wells Fargo's (WFC) report is scheduled for this Friday.
The Dow Jones Industrial Average jumped by 62 points, or 0.5%, to 13,391.
Breadth was positive, with winners edging losers 18 to 12. The top percentage blue-chip gainers were Boeing(BA) , Pfizer(PFE) , Hewlett-Packard(HPQ) and UnitedHealth Group (UNH) . Procter & Gamble (PG) also rose on Wednesday.
Procter & Gamble has announced the appointment of Macy's CEO Terry Lundgren to its board of directors, effective immediately. P&G director Johnathan Rodgers has decided not to seek re-election at P&G's annual shareholder meeting in October, choosing to retire from the board at that time. Shares were up 0.51%.
Bank of America shares were down 4.6% after the stock was cut to "neutral" from "outperform" at Credit Suisse, based on valuation.
All sectors in the broad market were advancing, led higher by consumer cyclicals, transportation, capital goods and conglomerates.
Volumes totaled 3.62 billion shares on the Big Board and 1.73 billion shares on the Nasdaq. Advancers were outpacing decliners by a ratio of 2.1-to-1 on the New York Stock Exchange and 1.9-to-1 on the Nasdaq.
Mark Newton, chief technical analyst at Greywolf, was anticipating more upside for stocks into the end of the week.
"Today's rally marks one of the sharpest two-day rallies in the SPX since 2008, but despite being short-term overbought, the success in closing above December highs in the major indices should likely help prices rally through end of week before any short-term top is in place," Newton said in a note.
Dan Greenhaus, chief global strategist at BTIG, issued a note saying fourth-quarter S&P 500 company growth estimates have steadily come down from September, and have been even lower excluding financials.
Greenhaus said a major reason for the drop in estimates is expectations that the tech sector may take a hit from Apple(AAPL) . Expectations are that the tech giant may suffer a rare year-over-year drop in quarterly earnings.
During this earnings season, investors will also be watching for corporate commentary on whether fourth-quarter profits suffered any collateral damage from the "fiscal cliff" battle.
Alcoa reported in-line fourth-quarter earnings of 6 cents a share on revenue of $5.9 billion, which beat top-line estimates . Analysts expected profit of 6 cents a share on revenue of $5.6 billion. Shares of Alcoa dipped 0.22%.