U.S. Stocks Rally On Earnings, End On Buoyant Note

(RTTNews) - After a slightly cautious start, stocks climbed higher on Tuesday thanks to sustained buying across the board.

Investors picked up stocks right through the day's session, digesting a slew of stronger than expected earnings updates and the latest batch of economic data.

Data showing a slowdown in the pace of growth in US labor costs helped raise expectations that the Federal Reserve will soften its aggressive approach in fighting inflation.

The major averages all ended with strong gains. The Dow ended with a gain of 368.95 points or 1.09 percent at 34,086.04. The S&P 500 surged 58.83 points or 1.46 percent to 4,076.60, while the Nasdaq climbed 190.74 points or 1.67 percent to 11,584.55.

The Dow gained about 6.6 percent in the month, while the S&P surged nearly 3 percent, and the Nasdaq gained as much as 11.5 percent.

Data showing a drop in labor costs has reinforced the view that the central bank will likely slow the pace of its monetary policy tightening and raise interest rate by 25 basis points.

The central bank's accompanying statement will be in focus for clues about further interest rate hikes.

On the economic front, data from the Labor Department showed employment cost index wages in the U.S. increased by 1% on quarter in the fourth quarter of 2022, after rising 1.3% in the previous quarter.

The S&P/Case-Shiller Home Price Index in the United States decreased 0.8% month-over-month in November of 2022, the same as in October and marking a fifth consecutive decline.

A report from the Institute for Supply Management (ISM) said the Chicago PMI in the United States fell back to 44.3 points in January of 2023 from 44.9 in December and compared to market forecasts of 45. The reading pointed to a fifth consecutive month of contraction in business activity in the Chicago region.

Meanwhile, the Conference Board's consumer confidence index came in with a score of 107.1 in January, after coming in at a revised 109.0 a month earlier.

Shares of General Motors soared more than 8 percent after the company reported a 14.8 percent in surge in fourth-quarter net profit.

Caterpillar shares drifted down more than 3 percent after the company reported a 29 percent drop in fourth quarter net profit at $1.45 billion, down from $2.12 billion in the year-ago quarter.

McDonald ended 1.3 percent down, weighed down by an announcement from the company that inflation could weigh on its margins this year. McDonald said its fourth quarter earnings totaled $1.90 billion, or $2.59 per share, compared with $1.64 billion, or $2.18 per share, in last year's fourth quarter.

Pfizer gained nearly 1.5 percent, recovering from a weak start. The company said its net income in the fourth quarter totaled $5.00 billion, up 47 percent from $3.39 billion a year ago. Earnings per share grew 48 percent to $0.87 from $0.59 last year.

Home Depot, United Health, Goldman Sachs, Microsoft and 3M gained 2 to 3 percent.

Salesforce.com, Travelers Companies, Boeing, American Express, Honewell International, Walmart, Verizon, P&G and Coca-Cola also ended with solid gains.

Asian stocks ended weak on Tuesday despite stronger purchasing managers' index data from China. As recession worries mount, investors awaited a slew of central bank decisions this week for direction.

European stocks closed broadly lower on Tuesday as the mood remained cautious and investors largely refrained from indulging in any significant buying ahead of interest rate decisions from the Federal Reserve, the Bank of England and the European Central Bank.

Weak retail sales data from Germany, slower pace of economic expansion in France, and the IMF's report that the British economy will shrink by 0.6 percent in 2023 weighed on sentiment.