Stocks ended modestly higher Monday, shrugging off an early decline, as investors waited to see whether big U.S. companies would deliver on expectations of strong earnings in 2013.
Alcoa became the first major U.S. company to report earnings late Monday, and the results were mostly good. Aluminum maker's income was higher than analysts were expecting, but its revenue fell slightly short of expectations. Later this week the pace picks up with reports from Bed Bath & Beyond, Wells Fargo and JPMorgan Chase.
A big factor driving the Standard & Poor's 500 up 9.6 percent this year has been optimism that it will be a good year for company profits. While the expectations for the first quarter are relatively modest, many investors are expecting to see more of a pickup in earnings later in the year.
"We need to see some earnings growth here to justify the big gains we've seen in the first quarter," said Ryan Detrick, a senior technical analyst at Schaeffer's Investment Research.
Earnings for companies in the S&P 500 index are expected to rise by 0.7 percent from the first quarter of last year, but that growth is expected to accelerate sharply to 13 percent in the final three-month period of the year, according to data from S&P Capital IQ.
On Monday the Dow Jones industrial average rose 48.23 points, or 0.3 percent, to close at 14,613.48. The index started the day lower and fell as much as 67 points during morning trading. Alcoa's gain of 1.8 percent was one of the biggest in the Dow. It rose 15 cents to $8.39. The stock was off seven cents in after-hours trading.
The S&P 500 index closed up 9.79 points, or 0.6 percent, at 1,563.07.
The Dow and S&P have struggled for direction over the past three weeks. The S&P 500 has alternated between gains and losses every day as investors take advantage of any weakness to add to their holdings.
Telecommunications stocks fell 0.5 percent and health care stocks inched up just 0.2 percent, lagging the rest of the market. The two industry groups have performed well this year as investors sought out less risky stocksthat pay good dividends. Health care companies are up almost 16 percent, making them the best performers in the S&P 500.
Lufkin Industries, an oilfield equipment maker, surged $24.03, or 38 percent, to $87.96 after General Electric Co. agreed to buy the company for $3 billion. GE wants to bolster its oil and gas operations. Its stock rose 19 cents, or 0.8 percent, to $23.12.
Johnson & Johnson logged the biggest percentage decline on the 30-member Dow Jones industrial average, dropping 93 cents to $81.11. Analysts at JPMorgan cut their rating on the stock to "neutral," saying it has risen too far, too fast. Johnson & Johnson is up 16 percent this year.
Stocks fell Friday after the government reported a slowdown in hiring that was far worse than economists had expected. The report capped a bad week: The S&P 500 logged its biggest weekly decline of the year as signs emerged that U.S. growth is starting to cool.
In other trading, the Nasdaq composite index rose 18.39 points, or 0.6 percent, to 3,222.25.
The yield on the 10-year Treasury rose to 1.75 percent from 1.71 percent late Friday. It went as 1.69 percent Friday, its lowest level of the year. The benchmark rate has fallen from a recent high of 2.06 percent reached March 11 as demand for low-risk assets increases.