US STOCKS-Wall Street ends sharply higher, powered by earnings momentum; Fed eyed

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McDonald's rises after beating Q3 estimates

Western Digital jumps on plan to separate into two cos

Onsemi slips on dour Q4 rev forecast

Fed meet, jobs data in focus

Updates to market close

By Stephen Culp

- Wall Street rallied on Monday, kicking off what promises to be a hectic week that includes a heavy earnings docket, economic data and the Federal Reserve's two-day monetary policy meeting.

All three major U.S. stock indexes closed up more than 1%, bouncing back from the previous week's sell-off. Interest rate sensitive megacap stocks provided the most upside muscle.

"Today is an earnings rebound," said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. "The market got oversold, and the reality is that earnings have been pretty good, the U.S. economy continues to chug along, and is likely to do so in the fourth quarter and into the first part of next year."

Third-quarter earnings season, firing on all cylinders, has reached its halfway point, with 251 of the companies in the S&P 500 having reported. Of those, 78% have beaten Wall Street estimates, according to LSEG.

Analysts now expect, on aggregate, annual third quarter S&P 500 earnings growth of 4.3%, a marked improvement over the 1.6% year-on-year growth seen at the beginning of October.

Investors have shown “less pessimism," Pursche added. "First- and second-quarter calls had a more negative tone. There was anxiety over interest rates, Fed policy, the recession that never came."

In the coming week, Caterpillar Inc CAT.N, Apple Inc AAPL.OO, Pfizer Inc PFE.N and Starbucks Corp SBUX.O are among the higher profile companies expected to post results.

On Tuesday, the Federal Open Markets Committee (FOMC) is expected to convene for a two-day monetary policy meeting, which is expected to culminate in a decision to let the Fed funds target rate stand at 5.25%-5.50%.

Investors will scrutinize the accompanying statement and Fed Chair Jerome Powell's subsequent Q&A session for clues regarding the central bank's path forward with rates.

"The Fed wants to see the cumulative effects of their rate hikes on the economy but they’ve also said they’re prepared to over-shoot in an abundance of caution, as long as inflation is above 3%," Pursche said.

The Bank of England and the Bank of Japan would also be announcing rate decisions this week, with the latter set to consider a further adjustment to its yield curve control (YCC) framework, according to a Nikkei report.

Closely watched economic data is on tap this week, culminating in the U.S. Labor Department's October employment report due on Friday.

Geopolitical strife arising from the Israel-Hamas conflict as well as a surge in Treasury yields have weighed on stocks in recent weeks, dragging the benchmark S&P 500 .SPX down about 10% from its intraday high in July.

According to preliminary data, the S&P 500 .SPX gained 49.19 points, or 1.19%, to end at 4,166.56 points, while the Nasdaq Composite .IXIC gained 143.74 points, or 1.14%, to 12,786.75. The Dow Jones Industrial Average .DJI rose 512.02 points, or 1.58%, to 32,927.51.

McDonald's MCD.N reported better than expected quarterly results, driven by demand for its more affordable food as consumers contend with inflation.

Onsemi ON.O tumbled after the chipmaker forecast weak fourth-quarter revenue on slowing demand for electric vehicles.

Western Digital Corp WDC.O jumped after the company disclosed plans to separate itself into two independent public companies.

Realty Income O.N slid following its announcement that it would by Spirit Realty Capital SRC.N in an all-stock deal valued at $9.3 billion. Spirit Realty Capital shares jumped.

(Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Shashwat Chauhan in Bengaluru; Editing by David Gregorio)

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