U.S. stocks traded solidly higher Tuesday after European markets rallied and corporate bellwether Alcoa predicted stronger demand in 2012. The Standard & Poor’s 500 index rose 1 percent at midday.
European markets soared after Fitch Ratings said it will not downgrade France’s credit rating this year. A downgrade for France could scuttle the region’s efforts to stem the debt crisis. Europe’s bailout fund relies on the sterling credit ratings of France and Germany to borrow at affordable rates. France’s CAC-40 index closed 2.7 percent higher; Germany’s DAX rose 2.4 percent.
Kicking off U.S. corporate earnings season, aluminum maker Alcoa said late Monday that its fourth-quarter revenue far outpaced analysts’ projections. CEO Klaus Kleinfeld predicted that global aluminum demand will increase 7 percent in 2012. Aluminum demand is seen as a proxy for broader economic trends because so many industries rely on the metal.
Many analysts had feared that Europe’s economic troubles and slow growth in developing countries would weaken U.S. corporate profits this quarter. The solid report from Alcoa seemed to quell those concerns and lifted traders’ hopes for strong corporate earnings reports in the coming weeks.
The S&P 500 index rose 12 points, or 0.9 percent, to 1,292 as of 12:15 p.m. Eastern time. All 10 of the index’s industry groups rose.
Tiffany & Co. plunged 11 percent, the most in the S&P 500 index. The jewelry retailer cut its forecast for full-year profit and said sales growth weakened in the U.S. and Europe during the holiday season.
The Dow Jones industrial average rose 85 points, or 0.7 percent, to 12,478. The Nasdaq composite index gained 24, or 0.9 percent, to 2,700.
The U.S. economy appeared to strengthen in recent weeks. A series of positive reports on hiring, manufacturing and consumer sentiment eased fears that Europe will drag the U.S. into another recession.
Traders hope the brighter outlook will boost corporate earnings results, which are due to be announced over the next few weeks. As the job market improves and consumers grow more willing to spend, companies might enjoy stronger consumer demand. Household spending is a crucial motor of economic growth.
Corporate news in Europe was less encouraging. Dutch electronics giant Royal Philips Electronics NV kicked off Europe’s earnings season by warning that its fourth-quarter profit was worse than expected because of Europe’s unraveling economy.