* Investors shift attention to earnings season
* FedEx rises 4 pct to highest close since mid-March
* Health Management sees takeover interest, stock jumps
* Dow up 0.5 pct, S&P 500 up 0.7 pct, Nasdaq up 0.6 pct
By Leah Schnurr
NEW YORK, July 9 (Reuters) - U.S. stocks rose for the fourth
session in a row on Tuesday as investors bet that companies will
be able to surpass the low bar set for earnings season, leaving
room for better-than-expected results that could drive the rally
The push higher in recent days has taken the benchmark S&P
500 to 1 percent below its all-time closing high of 1,669.16
reached on May 21.
The gains also suggest that investors are becoming more
comfortable with the prospect of the Federal Reserve slowing the
pace of its economic stimulus, which has been a major driver of
the equity rally this year.
FedEx Corp climbed on speculation that billionaire
William Ackman would make a big investment in the company. FedEx
shot up 4.4 percent to $103.15, its highest close since
Nine of the 10 S&P 500 industry sector indexes ended higher.
Material and industrial shares recorded the biggest gains after
Alcoa Inc affirmed its global demand forecast for
aluminum products when it reported results after Monday's
closing bell. Alcoa's release is traditionally viewed as the
unofficial start to earnings season.
For the most part, analysts are expecting second-quarter
results to be soft with weak sales, but expectations are for a
pickup later in the year. Even so, investors are starting to
think earnings expectations may have been ratcheted down too
"We think we have the potential once again for an earnings
season where expectations are a little too low, and when the
earnings finally do come out, we could have a little bit of an
upside surprise," said Ryan Detrick, senior technical strategist
at Schaeffer's Investment Research in Cincinnati.
Analysts expect S&P 500 companies' earnings to grow 2.9
percent in the second quarter from a year ago, well below the
6.1 percent that was forecast in April, according to Thomson
Forecasts for growth in the first quarter were similarly
revised lower to as little as 1.5 percent. The earnings season
ended up beating that with growth of 5.4 percent.
The Dow Jones industrial average gained 75.65 points,
or 0.50 percent, to end at 15,300.34. The Standard & Poor's 500
Index rose 11.86 points, or 0.72 percent, to 1,652.32,
the highest close since the end of May. The Nasdaq Composite
Index climbed 19.43 points, or 0.56 percent, to close at
Alcoa reported adjusted profit and revenue above Wall Street
forecasts after Monday's closing bell. Still, its stock dipped
0.1 percent to $7.91. In contrast, the S&P materials sector
index jumped 1.6 percent. The S&P industrials index
climbed 1.5 percent.
"(Analysts) have lowered the expectations enough that even
if the numbers aren't materially better, the outlooks will be
more favorable than what is the consensus now," said Alan Lancz,
president of Alan B. Lancz & Associates Inc in Toledo, Ohio.
"If Alcoa can do it with their clouds hanging over them,
then these other sectors should have a lot of room to beat
expectations and please investors."
The earnings calendar remains light until Friday when
JPMorgan Chase and Wells Fargo are set to report
Volatility has plunged in recent weeks on waning fears about
imminent reductions in the Federal Reserve's $85 billion a month
of bond purchases. The Market Volatility Index, Wall
Street's favorite barometer of investor fear, has tumbled more
than 30 percent since late June. On Tuesday, the VIX fell 2.9
percent to end at 14.35.
"It almost seems like the market is starting to get more
comfortable with the fact that the Fed could taper," Detrick
"We're in a different area from where we would have been
five or six weeks ago, where strong economic data was met with
selling. Now good news is actually being perceived as good
The Fed will release the minutes from its June policy
meeting on Wednesday. Investors will watch for clues into the
timing of possible trimming of stimulus measures.
Last month, Fed Chairman Ben Bernanke said the economy is
expanding strongly enough for the central bank to start slowing
the pace of its bond-buying stimulus later this year.
In the health-care sector, Health Management Associates Inc
has attracted takeover interest from Community Health
Systems Inc and other rivals about buying the hospital
operator, sources said. Shares of Health Management surged 8.3
percent to $16.75.
Intuitive Surgical shares slid 16.2 percent to
$419.30 after the maker of the Da Vinci surgical robot said on
Monday it expects second-quarter revenue below analysts'
Volume was roughly 5.8 billion shares on the New York Stock
Exchange, the Nasdaq and the NYSE MKT, below the year-to-date
average daily closing volume of 6.4 billion.
Advancers outnumbered decliners on the NYSE by a ratio of
nearly 3 to 1. Advancers also had the upper hand on the Nasdaq,
with three stocks gaining for nearly every two that fell.