US stocks climb in afternoon trading as earnings reports roll in; Chipotle jumps 12 per cent

The Associated Press
July 22, 2014 01:22 PM

NEW YORK, N.Y. - Solid earnings for a range of big companies helped nudge the stock market higher on Tuesday.

The restaurant chain Chipotle Mexican Grill and the cable giant Comcast surged after reporting better results than Wall Street expected.

"The news today is pretty good," said JJ Kinahan, chief strategist at TD Ameritrade. Kinahan pointed to a report out Tuesday that showed little sign of inflation and an overall stronger outlook for earnings. During conference calls to discuss quarterly results, more CEOs are taking an optimistic tone, he said, instead of warning about possible dangers.

"In the past, they all spent their time tempering expectations," Kinahan said. "This earnings season we're not seeing that at all. I think people are taking comfort in it."

The Standard & Poor's 500 index added 9.90 points, or 0.5 per cent, to 1,983.53. The Dow Jones industrial average rose 61.81 points, or 0.4 per cent, to 17,113.54. The Nasdaq composite advanced 31.31 points, or 0.7 per cent, to 4,456.02.

Chipotle surged $69.84, or 12 per cent, to $659.77, the biggest gain in the S&P 500 index. The burrito chain reported that stronger sales drove its quarterly profit up 26 per cent. The restaurant chain's results beat analysts' expectations, even as it raised prices on a range of menu items.

Comcast, the country's largest cable company, reported quarterly profits that topped Wall Street's targets as more people signed up for Internet service. Comcast gained 81 cents, or 1.5 per cent, to $54.63.

Wall Street is in the middle of corporate earnings season, when companies release their quarterly results. Investors pore over those reports to gauge the financial health of Corporate America, and in turn, the U.S. economy. Roughly 150 companies in the S&P 500 will report their results this week, including AT&T and Boeing on Wednesday. Visa and Amazon will report on Thursday.

Not all the results released Tuesday were positive. Weak sales of Diet Coke and fruit juice weighed down Coca-Cola's second-quarter results, leading the company to post weaker revenue than Wall Street expected. Overall profit fell slightly. Coca-Cola's stock sank $1.21, or 3 per cent, to $41.19.

Even though companies continue to post higher profits, the market still looks expensive compared to its historical average. The S&P 500 currently trades for 17.4 times earnings over the previous 12 months. The long-run average is closer to 15.

"In the short term, I expect the market to continue higher," said Brad McMillan, the chief investment officer at Commonwealth Financial. "But I am concerned about the market's valuation."

On the economic front, investors got another tame report on inflation. U.S. consumer prices inched up 0.3 per cent in June, with most of the increase coming from higher gasoline prices, according to the Labor Department. Core prices, which exclude the volatile food and energy sectors, were up just 0.1 per cent. Over the past year, core prices are up 1.9 per cent, close to the Federal Reserve's target rate for inflation.

U.S. government bond prices rose, pushing the yield on the 10-year Treasury note down to 2.46 per cent. Benchmark U.S. crude oil fell 17 cents to $104.42 a barrel.

In other company news:

Herbalife jumped $13.75, or 26 per cent, to $67.77. Activist investor Bill Ackman, who has a $1 billion bet against the company, vollied his latest attack against the nutritional supplement and weight-loss company, but investors appeared to dismiss it.


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