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Dow jumps 160 points, closes above 23,000 for first time

CNBC logo CNBC 10/18/2017 Fred Imbert

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The Dow Jones industrial average rose sharply Wednesday after tech giant IBM reported better-than-expected quarterly results.

The 30-stock index surged 160 points to end above 23,000 for the first time. The index first broke above 23,000 Tuesday but closed just below the mark. 

The S&P 500 and Nasdaq indexes closed little changed.

"As long as we have a steady economy and reasonable earnings, the path of least resistance remains higher," said Jack Ablin, chief investment officer at BMO Private Bank.

IBM posted adjusted earnings per share of $3.30 on revenue of $19.15 billion Tuesday after the close. Analysts polled by Reuters expected the company to report earnings of $3.28 per share on sales of $18.6 billion. The company's stock surged 9 percent in midday trade and was posted its biggest one-day rise since January 2009.

"IBM turned in a solid quarter last night and we continue to believe the company will emerge from this transition a much stronger IT organization. Moreover, IBM's 4.1% dividend yield and modest valuation should attract more value investors," Drexel Hamilton analyst Brian White said in a note Wednesday.\

The IT giant also reported its 22nd consecutive quarter of declining revenue, however.

This earnings season has gotten off to a good start, with more than 80 percent of companies that have reported beating on the bottom line, while 73 percent have topped sales estimates, according to The Earnings Scout.

"The good news is the number of companies currently beating estimates, and the margin by which they are doing so, is running above what these same 52 companies have recorded, on average, over the past three years and their top-line revenue growth has accelerated more," said Nick Raich, CEO of The Earnings Scout, in a note.

"The bad news is the rate of 3Q 2017 vs. 3Q 2016 earnings growth has slowed from last quarter, but is still running well above trend," Raich said.

Companies that reported Wednesday before the bell included Abbott Labs, M&T Bank and Supervalu.

Northern Trust also posted quarterly results, beating top and bottom-line estimates. The company's stock rose 5.2 percent and was the second-best performer on the S&P 500, which hit an intraday record in early trade.

United Continental, eBay and Dow component American Express are set to report after the close Wednesday.

Equities have been on a record-setting run this year as the three major indexes have risen more than 10 percent.

"It's clear what stocks have celebrated this year, and that is the global growth rebound and hopes for US tax cuts, along with a year of still massive QE from the ECB and BoJ. Fed rate hikes, QT and the end of ECB QE I guess will matter more next year," said Peter Boockvar, chief market analyst at The Lindsey Group, in a note to clients.

Hopes of U.S. tax reform have received a boost lately after the House passed a $4.1 trillion budget. The Senate is expected to vote on a budget bill this week.

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