U.S. stock indexes close higher as investors bet on earnings

Oct 19 Reuters - U.S. stock indexes closed higher on Tuesday with the biggest boosts from the technology and healthcare sectors as investors appeared to bet on solid quarterly reports even as some worried that it was too early to celebrate.

In its fifth straight session of gains, the benchmark S&P 500 index was just 0.4% below its mid-September record close while the Dow Jones Industrials average ended the day about 0.5% below its record in September.

Johnson Johnson's shares increased 2.3% providing a big boost to the S&P 500 after it raised its adjusted profit forecast for 2021. Insurer Travelers Cos Inc climbed 1.6% after beating its profit estimates.

High-profile technology and communications companies were also big S&P boosts with Apple Inc, Facebook and Microsoft all rising.

But in the second week of earnings with a very small sample of releases, Steve Sosnick, chief strategist at Interactive Brokers, worried about a possible pullback.

We're seeing volatility measures like the VIX flipping from complacent to nervous in a really short period of time, said Sosnick. We may be a bit ahead of ourselves. The most likely scenario is that we make one more run at new S&P highs and then pull back, subject to earnings. The CBOE market volatility index fell 0.6 points after hitting 15.57 earlier, its lowest level since mid-August.

Analysts now expect S&P 500 earnings to rise 32.4% from a year earlier, according to Refinitiv data.

The key for the market to go up from here will not be higher multiples, it will have to be higher earnings. That's why it's important to pay attention to what these profit margins do going forward and what the trajectory of GDP looks like, said Eric Marshall, portfolio manager at Hodges Funds.

Investors will be paying very close attention to pricing power, how companies are dealing with labor shortages and inflationary cost pressures within their business. The Dow Jones Industrial Average rose 198.7 points, or 0.56%, to 35,457. 31, the S&P 500 gained 33.17 points, or 0.74%, to 4,519. 63 and the Nasdaq Composite added 107.28 points, or 0.71%, to 15,129. Ten of the eleven major S&P 500 sectors closed higher, with healthcare stocks up 1.3% after dropping 0.7% in Monday's session. The next biggest gainer was utilities which rose 1.26% after falling almost 1% on Monday.

After closing up 0.2%, Netflix Inc added slightly to gains after the bell when quarterly results showed that global interest in Korean thriller Squid Game lured more new customers than expected.

Tesla Inc, which closed down 0.7%, is due to release results on Wednesday, with investors watching for indications of its performance in China.

Procter Gamble Co, fell 1% during the session, after it warned that it would have to raise prices of some products to counter higher commodity and freight costs.

However, Goldman Sachs Americas shares added 2% after being added to Walmart Inc. Conviction List. On Tuesday, the drugmaker Pfizer Inc rose 3% while Merck Co Inc rose 1.9% following the release of a competitor's COVID - 19 drug study results.

Its competitor, Roche Inc, fell 66% after the company's antiviral pill, developed with Atea Pharmaceuticals Inc, failed to help patients with mild and moderate COVID - 19.

Advancing issues outnumbered declining ones on the Nasdaq by a 1.51 - to - 1 ratio; on the NYSE, a 1.69 - to - 1 ratio favored advancers.

The S&P 500 recorded 44 new 52 week highs and 1 new lows; the Nasdaq Composite recorded 72 new highs and 69 new lows.

On U.S. exchanges 9.5 billion shares changed hands compared with the 10.29 billion moving average for the last 20 sessions.