NEW YORK -- U.S. stock indexes spent Wednesday drifting and finished with small gains. While big companies continue to report strong profit growth, investors aren't sure how much longer it will last.
The S&P 500 index gained 0.8 percent in the morning after fourth-quarter earnings from major companies including IBM, consumer products maker Procter & Gamble, and manufacturer United Technologies. Later, traders focused on some less encouraging quarterly reports and the muddled state of trade talks between the United States and China, and the S&P 500 lost 0.8 percent before it gradually turned higher.
The S&P 500 added 5.80 points, or 0.2 percent, to 2,638.70 after a 1.4 percent loss Tuesday. The Dow Jones industrial average climbed 171.14 points, or 0.7 percent, to 24,575.62.
The Nasdaq composite edged up 5.41 points, or 0.1 percent, to 7,025.77.
Smaller-company stocks tend to do worse than larger ones when prospects for profit growth fade. The Russell 2000 index of smaller-company stocks dipped 3.20 points, or 0.2 percent, to 1,454.26, and most of the companies listed on the New York Stock Exchange finished with losses.
Corporate profit growth shot higher in early 2018 after the Republican-backed corporate tax cut, but Liz Ann Sonders, chief investment strategist for Charles Schwab, said corporate profits are now growing at a slower clip because of economic weakness in Europe and China and a steep decline in oil prices.
"Even if we end up with the best-case scenario on trade, it doesn't alleviate ... global growth slowing, earnings uncertainty with regard to 2019, [or] monetary policy," she said.
Energy companies fared the worst as the price of crude oil fell for the third time in four days after a strong start to 2019.
IBM rocketed 8.5 percent to $132.89 after its fourth-quarter results surpassed Wall Street estimates. Investors were also pleased with the company's forecasts for 2019. BMO Research analyst Keith Bachman said critical operations including IBM's business and technology services divisions did well in the quarter. IBM stock sank 25 percent in 2018.
Procter & Gamble -- the maker of brands including Tide, Bounty and Crest -- rallied 4.9 percent to $94.84 after its profit came out ahead of expectations and its sales were well above analyst forecasts as well. The company said its annual profit and sales could be slightly stronger than it previously expected.
Elevator and jet engine maker United Technologies staged its biggest rally in almost a decade, rising 5.1 percent to $116.67 after its quarterly report. Media company Comcast jumped 5.5 percent, its biggest gain in almost three years, after it picked up more Internet subscribers and got a revenue increase from Sky, its big bet on European TV. The stock closed at $36.89.
The corporate tax cut might aid U.S. company profits on a permanent basis, but as investors compared 2018 to the year before, the tax cut caused a big one-time increase in profit growth. Investors have always known that boost wouldn't be repeated in 2019, and in recent months they've become more pessimistic, wondering if growth will slow dramatically or if profits might even start shrinking in the months ahead.
Sonders, of Charles Schwab, added that consumer confidence has been slipping, and the partial shutdown of the federal government, which has lasted a month, could make matters worse. She said numerous companies that perform contract work for the government might have to start laying off workers soon.
Business on 01/24/2019