Market Wrap: Stocks End Sharply Higher as China Jitters Ebb

Financial Markets Wall Street
Richard Drew/AP
By Noel Randewich

NEW YORK -- U.S. stocks ended sharply higher Tuesday, breaking a five-day losing streak as attention shifted from trouble in Chinese equities to U.S. corporate earnings and to speculation the first Federal Reserve interest rate hike may not come until December.

The Dow Jones industrial average and S&P 500 chalked up gains of more than 1 percent, while the Nasdaq composite lagged slightly.

%VIRTUAL-pullquote-The S&P has had five down days in a row and a lot of people are starting to nibble.%After the S&P sank over the past week toward the low end of a range it has traded in since February, some investors wagered the market was primed for a technical bounce-back.

"The S&P has had five down days in a row and a lot of people are starting to nibble," said Michael Matousek, head trader at U.S. Global Investors in San Antonio, which manages about $1 billion.

Market sentiment also reflected expectations the Fed would wait until December, rather than September, to raise interest rates for the first time since 2006, Matousek added.

With a two-day Fed policy meeting ending Wednesday, investors are looking for hints about the timing of that rate increase. No move on rates is expected this week.

"September is possible but the probability for a December rate hike is increasing," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.

The Dow Jones industrial average (^DJI) rose 1.1 percent, to end the session at 17,630.27. The Standard & Poor's 500 index (^GSPC) gained 1.2 percent to 2,093.25 and the Nasdaq composite (^IXIC) added 1 percent to finish at 5,089.21.

All the 10 major S&P 500 sectors rose, with the energy index leaping 3 percent as oil prices recovered from near six-month lows.

U.S. consumer confidence weakened in July to its lowest level since September, due in part to a less optimistic outlook on the labor market.

Earnings Watch

Ongoing uncertainty related to China's stock market, which closed lower again Tuesday, took a backseat to U.S. corporate earnings.

With second-quarter reports well under way, analysts now expect overall earnings of S&P 500 companies to edge up 0.3 percent and revenue to decline 4 percent, according to Thomson Reuters (TRI) data.

"Earnings are growing but very slowly. The market's biggest concern is the lack of top-line growth and where that growth is going to come from," said Tim Courtney, chief investment officer of Exencial Wealth Advisors, which oversees $1.3 billion.

After the bell, Twitter (TWTR) jumped 5.2 percent and Gilead Sciences (GILD) rose 3 percent after both companies posted their second-quarter results. Yelp (YELP) slumped 13 percent after its report.

During Tuesday's session, SuperValu (VALU) jumped 10.6 percent. It said it was exploring a spinoff of its discount grocery chain Save-A-Lot into a publicly traded company.

Advancing issues outnumbered declining ones on the NYSE by 2.7 to 1. On the Nasdaq, 1.67 stocks gained for each that declined. The S&P 500 racked up 15 new 52-week highs and 12 lows. The Nasdaq composite posted 36 new highs and 163 lows. Some 7.3 billion shares changed hands on U.S. exchanges, above the daily average of 6.7 billion so far this month.

-Tanya Agrawal contributed reporting.

What to watch Wednesday:
  • The National Association of Realtors reports pending home sales for June at 10 a.m.
  • Federal Reserve policymakers meet to set interest rates and release a statement at 2 p.m.
Earnings Calendar
These selected companies are scheduled to release quarterly financial results:
  • Altria Group (MO)
  • Anthem (ANTM)
  • Facebook (FB)
  • General Dynamics (GD)
  • GlaxoSmithKline (GSK)
  • Hilton Worldwide Holdings (HLT)
  • Humana (HUM)
  • International Paper Co. (IP)
  • Level 3 Communications (LVLT)
  • Marriott International (MAR)
  • Mastercard (MA)
  • MetLife (MET)
  • Northrop Grumman (NOC)
  • Southern Co. (SO)
  • Whole Foods Market (WFM)
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