Wall Street edges higher as earnings optimism eases bond worries

(Reuters) - Wall Street edged higher on Monday, led by technology stocks, as optimism about strength of the earnings season helped ease concerns on rising U.S. Treasury yields.

The yield on 10-year U.S. Treasuries <US10YT=RR> hit a four-year high of 2.998 percent, edging closer to the 3-percent level, amid worries about the growing supply of government debt and accelerating inflation as oil and commodity prices climb.

While rising yields usually tend to make stocks look less attractive in comparison, which was one of the triggers for the equity market sell-off in February, market strategists said strong earnings could help investors overlook such concerns this time around.

"If we get to that level (3 percent), it's not going to be too much of a negative for investors because earnings have been coming in quite good and that's what we need to push stocks higher," said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management.

Kravetz is of the opinion that bonds won't be a competition for stocks until the U.S. 10-year Treasury yield hits 4 percent.

"We've got great consumer sentiment and inflation is still contained. But as rates go up, and we do get risk up in the system."

With first-quarter results pouring in, profits are already turning out to be much stronger-than-expected, according to Thomson Reuters I/B/E/S.

Earnings at S&P 500 companies are expected to have risen 19.9 percent in the quarter, compared with 18.6 at the start of the season, making it the strongest quarter in seven years.

At 11:32 a.m. EDT the Dow Jones Industrial Average <.DJI> was up 38.09 points, or 0.16 percent, at 24,501.03, the S&P 500 <.SPX> was up 10.25 points, or 0.38 percent, at 2,680.39 and the Nasdaq Composite <.IXIC> was up 39.50 points, or 0.55 percent, at 7,185.63.

This week, 181 S&P 500 companies are scheduled to report including some of the technology heavy-hitters like Facebook <FB.O>, Microsoft <MSFT.O>, Amazon <AMZN.O> and Intel <INTC.O>. Alphabet <GOOGL.O> reports after markets close on Monday.

The S&P technology index was up <.SPLRCT> 0.6 percent, leading gains among the 11 major S&P sectors.

Merck <MRK.N> rose 1.4 percent after Goldman Sachs upgraded the stock to "buy".

Caterpillar <CAT.N> also rose 0.9 percent after Citigroup upgraded to "buy".

Shares of aluminum companies fell after the U.S. opened the door to sanctions relief for Russian aluminum giant United Company Rusal Plc <0486.HK>. Alcoa <AA.N> tumbled 11.5 percent and Arconic's <ARNC.N> 3.3 percent drop made it the biggest loser on the S&P.

Advancing issues outnumbered decliners by a 1.24-to-1 ratio on the NYSE and by a 1.26-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and 12 new lows, while the Nasdaq recorded 58 new highs and 41 new lows.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

04/23/2018 11:54

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