U.S. stocks closed firmly higher Tuesday, extending their best January run in at least three years, as investors picked-through the details of a busy corporate earnings session while remaining focused on the start of the Fed's two-day policy meeting in Washington.
Investors are facing a unusually busy week on Wall Street over the coming days, with more than 100 S&P 500 companies reporting December quarter earnings and the Federal Reserve unveiling its highly-anticipated interest rate decision on Wednesday.
With stocks sitting on a January gain of around 6% -- the best since 2019 -- paced by an 8.9% advanced for the tech-heavy Nasdaq, investors remain focused on corporate earnings, alongside near-term profit outlooks, to determine whether the current rally is sustainable.
Fresh forecasts from the International Monetary Fund, published Tuesday, suggest at least the chance of a firmer economic backdrop to support earnings growth, with the fund lifting its 2023 global GDP estimate to around 2.9%, thanks in part to solid U.S. demand, cooling inflation and the re-opening of China's economy after years of tight Covid restrictions.
Official figures from China, in fact, showed that economic activity rebounded firmly in January, the first full month of re-opening, with the National Bureau of Statistics indicating its main PMI measure jumped to 50.1 from 47.0 in December. Any reading over 50 is generally considered to indicate growth.
In the U.S., a host of industrial, tech, consumer and pharma stocks reported fourth quarter earnings today, including Pfizer (PFE), McDonald's (MCD), Caterpillar (CAT), Exxon Mobil (XOM) and General Motors (GM) before the start of trading and Advanced Micro Devices (AMD) and Snap (SNAP) after the closing bell.
Prior to today's updates 143 companies had reported December quarter earnings, and analysts expect collective S&P 500 earnings to fall 2.9% from last year to a share-weighted $443.6 billion.
Beat rates are modest, as well, with 67.8% of reporting companies coming in ahead of Wall Street forecasts -- only only by a small margin -- compared to the long-term average of 66.3% and the 75.5% average recorded over the past four quarters.
The Fed will also kick-off its two day policy meeting in Washington, with investors widely expecting the central bank to lift its benchmark Fed Funds rate by another 25 basis points, taking it to a range of between 4.5% and 4.75%
The European Central Bank and the Bank of England will also deliver key rate decisions in their respective economies on Thursday.
The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.20% lower at 102.071 by the close of trding in New York and on pace for its fourth straight monthly decline.
Benchmark 10-year Treasury note yields, meanwhile, were modestly lower at 3.498% inlate New York trading while 2-year notes were down 5 basis points from Monday's close at 4.199% following data from the Labor Department showing that its fourth quarter Employment Cost Index rose by just 1%, undershooting Street estimates of a 1.1% reading and offering further optimism that the Fed's long run of rate hikes are finally taming wage growth.
At the close of trading Wall Street, the S&P 500 was marked 59 points, or 1.47% higher while the Dow Jones Industrial Average gained 370 points, or 1.1%. The tech-focused Nasdaq added 190 points, or 1.67%
Semiconductor stocks were under pressure throughout the trading day, and ahead of Advanced Micro Devices' fourth quarter earnings after the closing bell, following an update from Samsung that suggested the world's biggest chipmaker would sacrifice profits in order to maintain market share.
Samsung, which already posted its weakest quarterly profits in eight years Tuesday, said it would maintain capex levels at around $39 billion, despite a slump in global chip demand, adding downward pressure on semiconductor prices.
Micron Technology (MU) fell 2.3% while Intel (INTC) retreated another 1.96% following it's dismal December quarter update last week.
Pfizer Inc. (PFE) shares gained 1.4% after the drugmaker posted stronger-than-expected fourth quarter earnings but issued a softer 2023 growth forecast thanks to waning sales for its Covid treatments.
General Motors, meanwhile, surged 8.35% after it posted stronger-than-expected fourth quarter earnings while issuing a robust 2023 outlook, following a year in which the carmaker overtook Toyota as the country's biggest seller.
Exxon Mobil gained 2.15% lower after the oil major posted stronger-than-expected fourth quarter earnings, while notching record full-year profits of $56 billion, amid a surge in global crude prices.
United Parcel Service (UPS) gained 4.67% on the back of stronger-than-expected fourth quarter earnings for the delivery group thanks to a focus on higher-margin packages.
UnitedHealth Group (UNH) shares closed 2.76% higher after the U.S. Department of Health and Human Services said it would look to recoup around $4.7 billion in funds -- but over the course of 10 years -- that may have paid to companies in the Medicare Advantage system.
In overseas markets, Europe's Stoxx 600 fell 0.5% in late-day Frankfurt trading, while Asia's region-wide MSCI ex-Japan index fell 1.38% and Japan's Nikkei 225 slipped 0.23%.
