Wall Street climbs on Big Tech enthusiasm

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(Reuters) – U.S. stocks rose on Tuesday on investors’ renewed enthusiasm for expected earnings reports from megacap technology companies Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) amid signs of economic resilience.

A survey showed consumer confidence increased to a two-year high in July, amid continued optimism about the labor market despite worries about a recession.

U.S. tech giants are expected to signal an end to a nearly year-long slowdown in their cloud businesses as technology spending and digital ads are likely to pick up.

Results from Alphabet and Microsoft are due after the bell. Shares in the owner of Google and the maker of Windows climbed 0.99% and 1.45%, respectively.

Investor fascination with artificial intelligence is a positive influence for megacap tech firms, said Steve Sosnick, chief strategist at Interactive Brokers (NASDAQ:IBKR). “When you have this much enthusiasm for a specific investing theme, you don’t need much of a reason for markets to move. It’s inertia.”

With the U.S. central bank on track for another 25-basis point interest rate hike on Wednesday, policymakers face a choice over how much weight to put on recent economic data.

The tech-heavy Nasdaq Composite index has rallied nearly 35.2% this year, helped by outsized gains in rate-sensitive megacap growth companies on optimism over artificial intelligence and hopes of an end to the U.S. Federal Reserve’s tightening cycle.

“Tech sold off horribly in 2022, so it’s no surprise that it has come back so strong because investors believe the Fed is either done or close to being done with its tightening cycle and that’s all the market wants,” said M. Jake Dollarhide, chief executive officer at Longbow Asset Management.

Companies outside tech are also performing well as lower valuations attract investors.

After logging its longest winning streak in over six years on Monday, the blue-chip Dow inched up even as a 0.99% slide in Boeing (NYSE:BA) capped gains.

RTX tumbled 12.24% after saying many of its Pratt & Whitney GTF engines that power Airbus A320neo jets will need “accelerated removals and inspections”.

The S&P composite 1500 passenger airlines sub index dropped 3.45%, bogged down by a 9.64% fall in Alaska Air (NYSE:ALK) after the airline’s annual revenue growth outlook missed expectations.

The Dow Jones Industrial Average rose 78.93 points, or 0.22%, to 35,490.17, the S&P 500 gained 18.03 points, or 0.40%, to 4,572.67 and the Nasdaq Composite added 111.07 points, or 0.79%, to 14,169.94.

Most of the 11 major S&P 500 sectors were subdued. But materials stocks gained 1.93% tracking rising metal prices as investors cheered pledges of support from a politburo meeting in China. [MET/L]

General Electric (NYSE:GE) jumped 6% after raising its annual adjusted profit forecast, while General Motors (NYSE:GM) slumped 4.24% after it posted a decline in adjusted pre-tax profit and margins in its key North American market from the previous quarter.

3M Co rose 5.29% as the industrial conglomerate raised its annual adjusted profit forecast.

The S&P 500 earnings are now expected to decline 7.7% for the second quarter, as per Refinitiv data.

Advancing issues outnumbered declining ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.12-to-1 ratio favored advancers.

The S&P 500 posted 31 new 52-week highs and no new lows; the Nasdaq Composite recorded 63 new highs and 72 new lows.