By Caroline Valetkevitch
NEW YORK (Reuters) - U.S. stocks gained on Thursday as Microsoft's strong earnings helped Nasdaq-listed companies stage a rebound from the tech-heavy index's worst decline since 2011 in the previous session.
Traders said investors also went bargain-hunting after the market rout on Wednesday that erased the Dow and the S&P 500's gains for the year and confirmed a correction for the Nasdaq. On Thursday, the Dow and S&P 500 were back in positive territory for the year.
Microsoft jumped 6.3 percent after it beat consensus estimates for revenue and profit. That, along with gains in chipmakers, helped technology stocks rise 2.89 percent.
"It's a little bit of an oversold bounce. Earnings have helped," said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.
"But it could also be short-covering. So you can't look at it blindly and say earnings are turning the market around and we're all clear. A lot of people are sceptical right now of any kind of action in the market, especially to the upside. That's why volume is light today."
The market has seen lighter volume in up days than down, which Pavlik said suggested the recent bout of selling might not be over.
The latest round of upbeat results came from a wide range of companies, including Visa, Whirlpool, Twitter and American Airlines, and offered relief after the earnings season began on a tepid note and then geared lower on sluggish outlooks from manufacturers and chipmakers.
That fanned worries over the impact of tariffs and China's corporate profits slowdown, as well as concerns ranging from rising costs, bond yields, Italy's budget struggles and upcoming U.S. congressional elections.
In a further signs that economic growth is moderating, U.S. business spending on equipment appeared to have remained slow in September and the goods trade deficit widened further as rising imports outpaced a rebound in exports.
At 3:11PM ET, the Dow Jones Industrial Average rose 469.8 points, or 1.91 percent, to 25,053.22, the S&P 500 gained 63.59 points, or 2.39 percent, to 2,719.69 and the Nasdaq Composite added 249.98 points, or 3.52 percent, to 7,358.38.
But the sell-off also made stocks cheaper. The S&P's valuation fell to a two-and-a-half year low of 15.3 times profit estimates for the next 12 months from 15.8, according to Refinitiv data.
Results from S&P 500 companies have pushed up third-quarter profit growth estimates to 23.6 percent from 21.8 percent in the last 10 days. But dour forecasts have pulled down fourth-quarter growth estimates to 19.4 percent from 19.9 percent, Refinitiv data shows.
Ford Motor, which is struggling with sales in China, rose 9.9 percent as its earnings report raised hopes for a strong finish to the year, bolstering gains in the consumer discretionary sector.
Advanced Micro Devices' weak forecast sent its stock tumbling 15.2 percent. But the Philadelphia Semiconductor index rose 1.97 percent, helped by Xilinx's 15.2 percent jump on its strong quarterly report.
Advancing issues outnumbered declining ones on the NYSE by a 2.73-to-1 ratio; on Nasdaq, a 2.91-to-1 ratio favoured advancers.
The S&P 500 posted one new 52-week high and 36 new lows; the Nasdaq Composite recorded 13 new highs and 202 new lows.
(Additional reporting by Amy Caren Daniel in Bengaluru; Editing by Arun Koyyur and Dan Grebler)
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Updated Date: Oct 26, 2018 02:05:15 IST