While you were sleeping: Wall St renews record highs

Wall Street climbed to fresh record highs as better-than-expected corporate earnings such as from Medtronic bolstered optimism about the outlook for profits.

At the close of trading in New York, the Dow Jones Industrial Average surged 160.50 points, or 0.7%, to 23,590.83. The Nasdaq Composite Index rallied 1.1% to a new high of 6862.48 and the Standard & Poor's 500 Index gained 0.65% to 2599.03.

The S&P 500 topped 2600 for the first time earlier in the session.

Goldman Sachs raised its 2018 target for the S&P 500 to 2850 from 2500, citing an expansion in profits and valuations, according to Bloomberg.

"Investors can be reassured by the strength and durability of the current economic cycle," Peter Oppenheimer, Goldman's chief global equity strategist, said in a note, Bloomberg reported.

"While it has already been a long cycle, the unwinding of the financial crisis has also meant that, until recently, it has been sub-par in terms of strength-as is often the case following financial crises."

Medtronic jumped 5.3% after the medical device maker posted better-than-expected quarterly results.

"Our second quarter financial results are very encouraging, when considered in the context of a quarter in which we faced three hurricanes and the California wildfires. Hurricane Maria, in particular, significantly affected our manufacturing operations in Puerto Rico," Omar Ishrak, Medtronic's chief executive officer, said in a statement.

"Against this backdrop, we delivered a sequential acceleration in our organic revenue growth, as expected."

The Dow also ascended to a fresh record high, touching 23,617.48, as gains by Apple and 3M, up 1.9% and 1.6% respectively, outweighed slides in Wal-Mart Stores and Nike, down 0.6% and 0.1% respectively.

"It is a return of momentum for the market, with some of positive earnings and recommendations as catalysts," Eric Wiegand, senior portfolio manager at US Bank's Private Client Reserve unit, told Reuters.

Technology stocks "have been in the leadership position for long and have produced remarkable earnings growth," he adds. "With the sector also standing to benefit from tax reforms, they will continue to be in a favoured position."

Campbell Soup bucks trend
Bucking the trend, Campbell Soup dropped 8.9% after it posted quarterly revenue and earnings that fell short of expectations and downgraded its full-year earnings outlook.

"This was a difficult quarter, particularly for our US soup business," Denise Morrison, Campbell's chief executive officer, said in a statement. "The operating environment remains volatile with a rapidly evolving retailer landscape and competitive activity pressuring the top line.

"Our bottom line performance was negatively impacted by a lower adjusted gross margin rate due in part to cost inflation, higher carrot costs and escalating transportation and logistics costs following the hurricane season."

Net and organic sales declined 2% in the first quarter, Campbell said, largely because US soup sales slid 9%.

"The sales decline was the result of one key customer's different promotional approach to the soup category for fiscal 2018, as we described last quarter," Ms Morrison noted.

Campbell said it cut its fiscal 2018 outlook and now expected adjusted earnings of between $US2.95 and $US3.02 a share, representing a fall of 1-3% from the previous year.

"We expect the entire food group to trade off today on the back of this earnings release, but we remind investors that the two major problems (a lost promotion at [Wal-Mart Stores], carrots) are [Campbell]-specific," JP Morgan analyst Ken Goldman said, according to Reuters.

Trying to gauge the outlook for interest rate increases next year, investors will eye a speech by outgoing Federal Reserve chairwoman Janet Yellen in New York while minutes of the most recent Federal Open Market Committee meeting will be released on Wednesday.

She has revealed she will stand down from the board of governors once Jerome Powell is sworn in as her successor next February.

The yield on the benchmark 10-year US Treasury note slipped to 2.363% from 2.370% on Monday on the greater uncertainty around future Fed policy.

In Europe, the Stoxx 600 Index finished down 0.4%. The UK's FTSE 100 Index rose 0.3%, France's CAC 40 Index gained 0.5% and Germany's DAX Index rallied 0.8%.

(BusinessDesk)