US Markets

Stocks rise despite weak earnings from Caterpillar and Boeing, bringing S&P 500 closer to record

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An analyst explains Caterpillar's earnings miss, full-year guidance cut

Stocks rose slightly on Wednesday as investors digested earnings reports from Caterpillar and Boeing.

The Dow Jones Industrial Average closed 45.85 points higher, or 0.2% at 26,833.95. The S&P 500 gained 0.3% to close at 3,004.52. The Nasdaq Composite climbed 0.2% to 8,119.79.

Wednesday's nudged the S&P 500 closer to a record set in July. The index is less than 1% from that level.

Caterpillar said it earned $2.66 per share in the third quarter, versus the Refinitiv consensus estimate of $2.88 per share. Revenue came in at $12.758 billion, while Wall Street expected revenue of $13.572 billion. The heavy machinery manufacturer lowered its full-year earnings per share forecast to a range of $10.59 and $11.09, lower than the expected $11.70. The stock closed 1.2% higher, however, after falling more than 6% in the premarket.

Meanwhile, Boeing shares climbed 1% after the airplane maker said it will stick to its timeline for the return of the 737 Max. That was enough to offset earnings that badly missed analyst expectations. The company reported a profit of $1.45 per share. Analysts polled by Refinitiv expected a profit of $2.09.

"BA's new guide for the MAX return to service was better than expected," said Buckingham Research analyst Richard Safran in a note. "It was expected that BA would move its expectations for MAX certification to the right - but BA's new guide was earlier than the 1Q20 date we think many expected."

Traders work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters

Weak results from Texas Instruments kept stocks in check, however. Texas instruments — which is often seen as a proxy for the microchip industry — plunged 7.5% after posting fourth-quarter guidance well below market estimates.

Texas Instruments' losses dragged down the broader chipmaker space. The VanEck Vectors Semiconductor ETF (SMH) slid 1.7%. ON Semiconductor dropped 3.6% while Qualcomm lost 1.6%.

Despite the weak results, the third-quarter earnings season has largely topped analyst expectations. Of the S&P 500 companies that have reported through Wednesday morning, 81% have posted better-than-expected results, according to FactSet.

To be sure, companies are beating watered-down estimates. S&P 500 earnings were expected to have fallen by more than 4% in the previous quarter entering the season, according to FactSet.

"Nobody is holding the market's feet to the fire on earnings right now," said Yousef Abbasi, director of U.S. institutional equities at INTL FCStone. "The market's perception now is central banks have completely backed off of any hike; they are all looking to ease."

The U.S. central bank is expected to cut rates for a third time this year at the end of the month. 

In Europe, U.K. lawmakers voted in favor of Prime Minister Boris Johnson's Brexit plan, but rejected his attempt to fast-track legislation to take the country out of the EU by the end of the month. The prime minister said the next step would be to wait for the EU to respond to a request to delay the current Brexit deadline of Oct. 31.

Wednesday's moves come after a slight decline in the previous session as weak earnings from McDonald's and Travelers overshadowed better-than-expected numbers from Procter & Gamble and United Technologies.

—CNBC's Sam Meredith and Michael Bloom contributed to this report.