Dow hits record high after strong earnings reports

Bloomberg

Solid earnings reports from US blue-chip companies sparked optimism in the world’s largest economy, lifting equities, the dollar and Treasury yields.
The Dow Jones Industrial Average hit a record high Tuesday after Caterpillar Inc. and 3M Co. delivered results that topped estimates, while General Motors Co. and Fiat Chrysler NV also rallied on earnings. Benchmark Treasury yields punched through the key 2.40 percent level, while Bloomberg’s dollar index reached the highest point since July.
“For the most part, I think, you’ll see earnings continue to come in good—and not just earnings, but increases in revenue that look stronger than expected,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas. “The economy is doing great here domestically, the whole world economy is certainly improving, and we’re optimistic that the market is going to continue to go higher because it is earnings-driven.”
Elsewhere, investors were eyeing catalysts stretching from an impending European Central Bank meeting and the crisis in Catalonia to the prospects for US tax reform and the next Federal Reserve leader. While European stocks were dragged down by Swiss drugmaker Novartis AG, government bonds slumped and the euro strengthened after data showed the region’s economy maintaining momentum. Japanese equities built on recent gains, with the Nikkei climbing for a record-breaking 16th consecutive session as the yen weakened. Gold fell as industrial metals advanced.
The strong results from some of America’s biggest companies fueled speculation that growth is picking up even as President Donald Trump’s economic policies remain largely unfulfilled. That lifted a tone of caution over the the timing of an announcement on the next Fed leader and the chances that tax cuts get enacted this year.
“Assuming the tax reform bill does get passed, it could be a very strong environment, especially with interest rates where they’re at, for small caps and mid caps,” Kevin Miller, chief executive officer of Minnesota-based E-Valuator Funds, said.
The US economy probably expanded at about a 2.5 percent annualised pace in the third quarter, restrained in part by the effects
of two hurricanes, economists
forecast the government to report on Friday.
Among other US data this week, orders for big-ticket durable goods probably increased in a sign of firmer manufacturing growth.
The yield on 10-year Treasuries climbed four basis points to 2.41 percent, the highest in more than five months. Germany’s 10-year yield gained four basis points to 0.47 percent, the highest in almost four weeks. Britain’s 10-year yield increased four basis points to 1.354 percent, the highest in more than a week. Japan’s Topix index rose 0.7 at the close in Tokyo.
The Nikkei 225 added 0.5 percent. Australia’s benchmark ended fractionally higher. Hong Kong’s Hang Seng Index fell 0.5 percent and the Shanghai Composite Index added 0.2 percent. The MSCI Asia Pacific Index rose 0.1 percent.