US stocks rise to a record on expectations for companies to make even fatter profits
NEW YORK (AP) — The U.S. stock market hit an all-time high as expectations rise for companies to keep making more money. The S&P 500 climbed 0.6% Tuesday and topped its prior record set in August. The Dow Jones Industrial Average added 0.5%, and the Nasdaq composite tacked 0.4% onto its own all-time high set the day before. Constellation Energy helped lead the way after announcing a long-term deal to provide Google with electricity. Lamb Weston jumped after becoming the latest U.S. company to deliver a fatter profit than analysts expected. Stocks also got help from easing yields in the bond market.
THIS IS A BREAKING NEWS UPDATE. Check back for updates. AP’s earlier story follows below.
NEW YORK (AP) — The U.S. stock market is closing in on an all-time high on Tuesday.
The S&P 500 climbed 0.7% and is on track to finish the day above its record closing level set in August. Even with worries about war, high inflation and pressure from the bond market continuing to weigh on it, the backbone of many 401(k) accounts has soared 23% since hitting a bottom in late March.
The Dow Jones Industrial Average was up 283 points, or 0.6%, with roughly an hour remaining in trading, while the Nasdaq composite was adding 0.6% to its own all-time high set the day before. The spurts for stock prices are helping investors feel better about their finances, or at least less bad, when Americans are generally feeling more discouraged about keeping up with the fast-rising cost of living.
Many of the fears that sent the U.S. stock market to its bottom in March, sparked by the war with Iran, have indeed come true. Oil prices have jumped, which has made inflation worse. That has helped crank yields higher in the bond market, which is threatening to slow the economy by making it more expensive for everyone to borrow money.
But despite all those challenges, one vital source of support has remained resolute for the U.S. stock market: the relentless ability for U.S. companies to make bigger profits.
Lamb Weston, which sells frozen fries and other potato products, said on Tuesday that its profit and revenue during its latest quarter topped its projections, for example. The results also beat analysts’ expectations, and its stock rallied 8.2%.
CEO Mike Smith said the company continues to deal with unexpected increases in freight and other expenses as inflation remains high. But the company nevertheless raised its forecast for an underlying measure of profit for its full fiscal year.
It's not just potato products proving to be more profitable. All kinds of companies are lining up to report soon how much profit they made from July through September, and expectations are high for strong growth. Delta Air Lines will report its third-quarter results on Friday, with several of the country’s biggest banks headlining the following week.
Analysts expect companies in the S&P 500 to deliver overall growth of nearly 30% in earnings per share from a year earlier, according to FactSet. If they’re correct, it would be the third straight quarter of growth better than 25%.
That's crucial because corporate profits are one of the big levers that help set prices for stocks, along with interest rates. At the moment, high bond yields are pushing downward on stock prices because they make investors less willing to pay high prices for investments that aren't bonds. But earnings are rising at the same time “to win the tug-of-war against yields” and keep the market high, according to strategists at Barclays Capital.
Bond yields worldwide offered some slack on Tuesday after falling back from their highest levels in years or even decades. The yield on the 10-year Treasury, which is the focal point of the U.S. bond market, eased to 5.26% from 5.31% late Monday.
It fell after oil prices steadied themselves somewhat. The price for a barrel of Brent crude oil, the international standard, fell as low as $97.06 in the morning before pulling back to settle at $100.58. While that was up 0.3% from Monday's settlement price, it's still below the nearly $110 it was at a few weeks ago, and the easing removes some of the pressure from inflation.
On Wall Street, stocks involved in the artificial-intelligence frenzy have been behind much of the market's record-setting run, and Constellation Energy jumped 11.7% on Tuesday.
It announced a long-term deal to supply Google with about as much electricity as a new nuclear reactor makes. The boom in AI data centers has made not just electricity more in demand but also construction crews and materials throughout the economy.
Elsewhere on Wall Street, Option Care Health soared 32.9% after CD&R and McKesson said they’re buying the provider of infusion services. The two are paying $32.05 for each Option Care Health share, valuing it at roughly $5.8 billion.
CDR is a private investment firm. Shares of McKesson, the healthcare services company, added 1.2%.
They helped offset a drop for Stryker, which fell 2.2% after the medical technologies company said Kevin Lobo will step down as its chief executive at the end of the year. He's held the position since 2012 and will become Stryker's executive chairman. The company said its current chief operating officer, Spencer Stiles, will replace Lobo.
In stock markets abroad, indexes ticked higher in Europe as yields continue to swing in their bond markets amid concerns about high government debts and tight budgets.
In France, tens of thousands of demonstrators marched in support of protests by students demanding more funding for schools.
In Asia, Japan’s Nikkei 225 jumped 1.1%, and Hong Kong’s Hang Seng climbed 1%, but South Korea’s Kospi dropped 0.9%.
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AP Business Writers Chan Ho-him and Matt Ott contributed to this report.
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An earlier version of this story incorrectly identified Constellation Energy.
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