NEW YORK - Companies that do well when the economy is improving led the market higher Tuesday after several of them notched strong earnings.
Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet, were big winners after reporting profits that impressed investors. Financial stocks rose after Travelers’ earnings beat analysts’ expectations.
That’s a change from earlier this year. The stock market’s surge in 2013 has been led by so-called defensive industries such as health care, consumer staples and utilities. Investors buy those stocks when they want reliable earnings and regular dividends. Until now, they have been unsure about the strength of the economic recovery and been less enthusiastic about stocks whose fortunes are more closely tied to swings in the U.S. economy.
“For a change we are actually seeing more cyclical parts of the economy lead the market,” said Michael Sheldon, chief market strategist at RDM Financial Group.
The Dow Jones industrial average and the Standard & Poor’s 500 index both rose 1 percent, and rose for a third straight day.
The markets closed higher even after stocks and other markets were shaken in the early afternoon when a fake posting on the AP’s Twitter account prompted a sudden sell-off.
A posting saying that there had been explosions at the White House and that President Barack Obama had been injured was sent at 12:08 p.m. The Dow immediately plunged about 143 points, from 14,697 to 14,554. The AP said its Twitter account had been hacked and the posting was fake.
Within five minutes the Dow had snapped back.
Joe Fox, chairman and cofounder of online brokerage Ditto Trade, was at work in Los Angeles when he got a call from the Chicago brokerage offices telling him what had happened. Fox watched the market tanking, and its quick bounce-back.
“It was a tipsy-turvy roller coaster for a few minutes there,” Fox said.
Fox said the news didn’t sound right to him when he first heard it. He thinks that traders are being more cautious in the wake of the 2010 “flash crash” that sent the Dow spiraling 600 points in a matter of minutes.
After the brief sell-off investors turned their focus back to earnings.
A resurgence in corporate profits after the recession has been one of the drivers that pushed the Dow up 12 percent and the S&P 500 up 11 percent this year. However investors remain unsure how much further earnings can improve without the outlook for growth in the global economy improving as well.
Tuesday’s upturn in stocks put both indexes back in theblack for April and closer to the record high closes they reached April 11. It was a sharp change of tone from last week, when the market had its worst drop since November. That sell-off started after economic growth in China, the world’s second-largest economy, slowed.
So far, 69 percent of the companies that have reported earnings for the first quarter have beaten analysts’ expectations, better than the 10-year average of 62 percent, according to data from S&P Capital IQ.
Analysts expect earnings to rise by 2.3 percent in the first quarter, slower than the 7.7 percent growth in the previous three-month period.
Netflix shares rose $42.62, or 24 percent, to $216.99 after reporting a big gain in subscribers. Coach rose $4.96, or 11 percent, to $55.55. Travelers rose $1.77, or 2.1 percent, to $86.35.
The Dow closed up 152.29 points at 14,719.46. The S&P 500 ended 16.28 points higher at 1,578.78. Both indexes are about 1 percent below their record high closes from nearly two weeks ago.
The Nasdaq composite rose 35.78 points, or 1 percent, to 3,269.33.
Four stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume was average at 3.5 billion shares.
Information for this article was contributed by Christina Rexrode of The Associated Press.
Business, Pages 24 on 04/24/2013