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Blue Chips Climb as Investors Focus on Earnings Season

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07/10/2018 | 09:36pm CEST

By Ben St. Clair and Allison Prang

The Dow Jones Industrial Average and S&P 500 rose Tuesday, putting both indexes on track for their seventh session of gains in the past eight trading days, as investors looked ahead to what is expected to be another strong corporate earnings season.

The Dow climbed 132 points, or 0.5%, to 24908 and the S&P 500 added 0.3%, while the Nasdaq Composite slipped less than 0.1% after rising earlier in the day. The blue-chip index had its best day in a month Monday, and all three indexes have climbed in recent sessions, despite uncertainty over trade threats with China.

Two sectors that have underperformed this year -- utilities and consumer staples -- led the way in the S&P 500, rising 1.3% and 1%, respectively. Financials, the only sector in the red, fell 0.5%.

Many investors are looking ahead to the second-quarter earnings season, which unofficially kicks off Friday, when three of the biggest U.S. banks report results. Earnings for companies in the S&P 500 are expected to grow 20% in the second quarter from the year-earlier period, according to FactSet.

"It's still too early to see where this goes, but I'm still very optimistic...We are going to be 20-plus percent earnings growth," Tom Stringfellow, chief investment officer at Frost Investment Advisors, said.

But he also noted tariffs are still more important than earnings right now given how early it is in earnings season. Even so, trade concerns "don't seem to be impacting investor enthusiasm," Mr. Stringfellow said.

While "the major fears are still trade," investors aren't feeling as bad about trade friction as before because it doesn't seem to be getting worse, said Erik Davidson, chief investment officer for Wells Fargo Private Bank.

The first round of tariffs between the U.S. and China went into effect Friday , but U.S. stocks have risen since then as there haven't been signs of escalating tensions yet.

Chris Teschmacher, a multiasset portfolio manager at Legal & General Investment Management, said, "If there isn't an increase in the trade war, then the current level of tariffs are quite minimum" in relation to the economy.

While trade disputes on their own may not prove fatal to the global economy, the addition of tightening monetary policy from the Federal Reserve and political uncertainty in Europe make a risky situation worse, said Ronald Temple, head of U.S. equities and co-head of multiasset investing at Lazard Asset Management.

"You put enough of these factors together and I do think you chip away at the foundations of corporation confidence and consumer confidence," said Mr. Temple.

In Europe, the Stoxx Europe 600 rose 0.4%. China's Shanghai Composite Index climbed 0.4%, while Japan's Nikkei added 0.7% and South Korea's Kospi increased 0.4%.

Write to Allison Prang at allison.prang@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 1.82% 2699.95 End-of-day quote.-18.53%
DJ INDUSTRIAL 0.71% 26246.96 Delayed Quote.6.18%
KOSPI COMPOSITE INDEX -0.03% 2308.1 Real-time Quote.-6.18%
NASDAQ 100 0.80% 7494.3994 Delayed Quote.16.23%
NASDAQ COMP. 0.76% 7956.1068 Delayed Quote.14.38%
NIKKEI 225 1.08% 23672.52 Real-time Quote.1.45%
S&P 500 0.54% 2904.31 Real-time Quote.8.05%
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