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Market News The close: S&P 500, Nasdaq notch record highs on strong earnings

The S&P 500 index and the Nasdaq registered record closing highs after a broadbased rally on Tuesday, as a clutch of better-than-expected earnings reports eased concerns about a slowdown.

In Tuesday’s trading the benchmark index finally erased all the steep losses it saw in late 2018 by ending the day above the previous record reached on Sept. 20. It closed just 0.3 per cent below its intra-day record of 2,940.91 hit on Sept. 21.

The S&P has risen 17 percent so far this year, with help from a dovish Federal Reserve and hopes of a U.S.-China trade resolution as well as the upbeat start to the first-quarter earnings season.

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“Part of what’s pushing the S&P up is a general belief it will make a new high,” said Rick Meckler of Cherry Lane Investments, a family investment office in New Vernon, New Jersey, who expects that more earnings reports later in the week could push the index above its all-time high.

The diversity of industry sectors reporting strong results on Tuesday gave further reassurance to Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware, who expects the trend to continue.

“Today was a very broadly representative day of the overall economy. That’s what’s driving the markets,” said Roth citing results from United Technologies Corp, Lockheed Martin Corp and Coca-Cola Co.

“If the earnings season is as strong as we expect the next major signpost is the trade situation with China and getting that resolved,” said Roth.

The Dow Jones Industrial Average rose 145.34 points, or 0.55 per cent, to 26,656.39, the S&P 500 gained 25.71 points, or 0.88 per cent, to 2,933.68 and the Nasdaq Composite added 105.56 points, or 1.32 per cent, to 8,120.82.

Profits of S&P 500 companies are still expected to decline 1.3 per cent in the first quarter, in what analysts say could be the first earnings contraction since 2016. However, forecasts have largely improved since the start of April.

Amazon.com Inc, set to report results later this week, gained 2.2 per cent, providing the biggest boost to the S&P 500 and the Nasdaq.

Ten of the 11 major S&P sectors were higher, with a rebound in healthcare, which gained 1.6 per cent, providing the biggest boost. The healthcare sector has been slammed with 6.7 per cent drop in the last two weeks on U.S. policy concerns.

“People just realized (healthcare) got beaten so far down it might be worth taking a chance,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

The consumer staples sector was the only S&P sector that ended the day lower as investors favored riskier bets. The energy and utilities sectors were the next weakest performers on the day.

Twitter Inc shares soared 15.6 per cent after the social media company posted better-than-expected quarterly revenue and a surprise increase in monthly active users.

Hasbro Inc rose 14.2 per cent after the toymaker reported a surprise quarterly profit.

Coca-Cola rose 1.7 per cent after its quarterly sales beat estimates, helped in part by strong demand for Coke Zero.

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Lockheed Martin jumped 5.7 per cent after it reported upbeat quarterly results and lifted its full-year profit forecast on strong demand for its missiles and fighter jets.

United Technologies rose 2.3 per cent after it raised its full-year profit forecast.

Procter & Gamble Co fell 2.6 per cent and was the biggest drag on the market after reporting a decline in its third-quarter operating margin.

In Toronto, the S&P/TSX composite index also closed at a new all-time high, finishing up 92.12 points, or 0.56 per cent, at 16,669.40.

Energy stocks led the way, rising 1.44 per cent as oil prices hit their highest in about six months.

U.S. crude futures settled up 75 cents, or 1.1 per cent, at $66.30 a barrel, after hitting an intraday high of $66.60, the highest since Oct. 31.

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Brent crude rose 47 cents, or 0.6 per cent, to $74.51 a barrel. The global benchmark earlier touched $74.73, a level not seen since Nov. 1.

The Canadian dollar weakened to a nearly four-week low against its U.S. counterpart on Tuesday as the greenback climbed broadly and investors bet that the Bank of Canada would forgo language pointing to further interest rate hikes.

Canada’s central bank is expected to hold its benchmark interest rate steady at 1.75 per cent on Wednesday and for the rest of this year, with calls for the next hike in early 2020 resting on a knife’s edge, a Reuters poll showed.

“Any hiking bias will probably be removed completely from the statement,” said Ranko Berich, head of market analysis at Monex Canada and Monex Europe. “The impetus for a rate hike has been removed by slowing economic data.”

The Canadian economy has taken a hit from the province of Alberta’s mandatory production cut of oil - its biggest export - a slowdown in the housing market and wilting business sentiment over worries surrounding the U.S.-China trade war.

Canadian wholesale trade increased by 0.3 per cent in February from January, Statistics Canada said on Tuesday. But trade was down 1.5 per cent after excluding the motor vehicle and motor vehicle parts and accessories subsector.

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The U.S. dollar rose against a basket of major currencies as traders favored the greenback ahead of the release on Friday of U.S. gross domestic product data for the first three months of 2019.

The Canadian dollar was trading 0.7 per cent lower at 1.3436 to the greenback, or 74.43 U.S. cents, its biggest decline in nearly seven weeks. The currency touched its weakest level since March 29 at 1.3443.

The decline for the loonie came U.S. crude oil futures settled 1.1% higher at $66.30 a barrel.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 8.5 Canadian cents to yield 1.576% and the 10-year

Reuters

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