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U.S. stocks rallied Tuesday, with the Dow jumping by triple-digits in early trade and the Nasdaq hitting a milestone, as stock-market optimism accelerated on upbeat earnings and the possibility of tax reform.
The Dow Jones Industrial Average DJIA, +1.10% rose 233 points, or 1.1%, to 20,995, outperforming other benchmarks after five of its components reported quarterly results, with four of them coming in ahead of forecasts.
Caterpillar Inc. CAT, +6.46% lifted its full-year revenue outlook and reported better-than-expected results, sending shares up nearly 7%. Fellow Dow component DuPont DD, +3.15% rose 3% after topping analyst forecasts.
Fast-food giant McDonald’s Corp. MCD, +4.05% gained 3.4% after it served up first-quarter earnings that beat expectations. Bucking the trend was Coca-Cola Co. KO, -0.12% which reported a drop in its first-quarter earnings and sales, and shares of the soda titan fell 0.9%.
Meanwhile, the S&P 500 SPX, +0.54% was up 15 points, or 0.7%, to 2,389, with 10 of the main 11 sectors trading higher. Materials and financials were leading gains, up more than 1%. The index is less than 10 points below its record close.
The Nasdaq Composite Index COMP, +0.52% rose 33 points, or 0.5%, to 6,022, trading in record territory, and surpassing a psychologically important milestone of 6,000.
Strong corporate quarterly results were seen as a sign that the market’s recent move higher, which took major indexes to repeated records and raised concerns about valuation, may be justified by better-than-expected earnings from American corporations.
“Today is one of the busiest days in terms of corporate earnings releases, with 36 companies reporting before and after the market and so far earnings have been strong,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.
“While earnings have been driving markets higher, tax cuts would drive multiple expansion and so far it looks like the market is very optimistic on tax cuts,” Antonelli said.
Monday’s jump in risk assets followed the first round of the French presidential election, where centrist candidate Emmanuel Macron performed well and helped to partially assuage concerns that an anti-European Union candidate would ultimately prevail. Macron faces far-right candidate Marine Le Pen in a May 7 runoff election.
The market’s positive momentum could continue, “particularly if Trump can kick-start his reform plans around taxation,” Chris Beauchamp, chief market analyst at IG, said in a note to clients.
In the back of investors’ minds are worries about a potential government shutdown on Saturday. But those may have eased, after Trump backed off on a demand for border-wall funding seen as blocking a deal.
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Turning to data, U.S. house prices continued to show no signs of slowing, hitting their highest in nearly three years as demand remains hot, especially in the Pacific Northwest and Dallas.
The Conference Board’s consumer confidence survey for April and new-home sales for March are both due at 10 a.m. Eastern.
Stock movers: An long list of companies are reporting on Tuesday. In addition to the Dow stocks, results from Biogen Inc. BIIB, +4.80% lifted the biotech firm by 5%. Rite Aid Corp. RAD, +9.02% jumped 6.2% on an earning beat.
Lockheed Martin Corp. LMT, -2.43% shares fell 2.2% after the company reported lower-than-expected revenues.
Investors in Asia kept a close eye on tensions in the Korean Peninsula. North Korea marked the anniversary of the founding its military with a large live-fire exercise, as a U.S. aircraft carrier strike group docked in South Korea as planned, reported Reuters. There had been concerns that North Korea could mark Tuesday’s anniversary with another nuclear test of that of a long-range missile.
Ryan Vlastelica contributed to this article.