Wall St. higher as healthcare, bank stocks gain

By Sinead Carew

(Reuters) - Wall Street's major indexes on Tuesday extended the New Year rally on investor optimism ahead of quarterly earnings reports.

The S&P 500 and Nasdaq were on track for their sixth closing record in a row. The Dow had snapped a 3-day run of closing records in the previous day's session.

Defensive S&P sectors - utilities, real estate and telecommunications - were out of favour, while financial and healthcare sectors rebounded to reverse Monday's losses.

"While investor sentiment continues to be high and confidence is high, there's still some caution from investors. Where do you position yourself" if wage growth pushes up inflation? asked Jeffrey Carbone, managing partner at Cornerstone Wealth in Huntersville, North Carolina. "It becomes a question of how much longer can this go, how much higher."

 

At 3:01 p.m. ET, the Dow Jones Industrial Average <.DJI> rose 124.84 points, or 0.49 percent, to 25,407.84, the S&P 500 <.SPX> gained 7.9 points, or 0.29 percent, to 2,755.61 and the Nasdaq Composite <.IXIC> added 16.95 points, or 0.24 percent, to 7,174.34.

The interest-rate sensitive utilities index <.SPLRCU> fell 0.8 percent, while the real estate sector <.SPLRCR> was down 1 percent. Telecommunications <.SPLRCL> fell 1.6 percent.

Investors were hopeful about global economic growth and tax-cut led gains for corporate earnings, but they are anxiously watching whether any economic boost from the tax overhaul could overheat inflation and lead to a sharper rise in interest rates.

"So long as inflation remains at around these levels, it will certainly support the multiples that we have," said Tim Dreiling, regional investment director for The Private Client Reserve of U.S. Bank.

After a lukewarm December jobs report, signs of a pickup in inflation could come in the monthly consumer price report due on Friday.

Big U.S. banks are set to kick off fourth-quarter earnings season on Friday. Investors will seek more detail on the impact of corporate tax cuts, and what companies plan to do with the savings.

Profits for S&P 500 companies are expected to rise 11.8 percent in the fourth quarter, compared with an 8-percent increase a year earlier, according to Thomson Reuters I/B/E/S.

A handful of retailers, including Target , Kohl's Corp and Lululemon Athletica have reported solid rises in same-store sales for the holiday period and raised fourth-quarter profit forecasts.

Boeing was the biggest boost for the Dow with a 2.4-percent increase, after it said it delivered 763 jetliners in 2017, likely retaining its title as the world's biggest plane maker.

The S&P healthcare sector <.SPXHC> was boosted by a 1.6-percent rise in Johnson & Johnson , a 4.9-percent gain in Gilead and a 7.9-percent jump in Boston Scientific shares.

The financial sector was helped by a rise in U.S. 10-year Treasury yields to a 10-month high after the Bank of Japan said it would trim purchases of Japanese government bonds.

Chip stocks were the biggest drag on the technology sector <.SPLRCT>, which was down 0.09 percent. Intel fell 2.4 percent after reports that systems running on its chips slowed after Microsoft Corp released patches for security threats.

Declining issues outnumbered advancing ones on the NYSE by a 1.23-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favoured decliners.

The S&P 500 posted 122 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 126 new highs and 23 new lows.

(Additional reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)