Stocks - Dow Extends Gains as Financials Flourish on Bullish Banks

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Investing.com – The Dow closed higher for a second day in a row Wednesday, led by a surge in financials as upbeat quarterly results from Wall Street banks raised investor optimism on earnings.

The Dow Jones Industrial Average rose 0.59%. The S&P 500 gained 0.22%, while the Nasdaq Composite added 0.15%.

Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) delivered fourth quarter results that beat on both the top and bottom lines, sending their shares up 7.2% and 9.6%, respectively. Goldman's gain added 116 points to the Dow's gain by itself.

Financials were also boosted by a rise in BlackRock Inc (NYSE:BLK) despite reporting earnings and revenue that fell short of estimates.

Some market participants appeared to give the company the benefit of the doubt, citing an attractive valuation.

"Currently trading at 14.3 times our 2019 earnings per share estimate and yielding 3.2%, with the dual catalysts of a growing and recurring technology servicing revenue base and the secular tailwinds associated with ETFs, we view Blackrock as undervalued versus historical levels," said CFRA, an independent researcher.

Financials rose 2.20% as the sector continues clawback losses of 15% over the past year.

In other earnings news, United Continental's (NASDAQ:UAL) better-than expected earnings, reported Tuesday after markets closed, lifted its shares more than 6% higher. American Airlines Group (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV) also ended the day higher.

The gloomy backdrop for retailers, meanwhile, continued to hurt performance, with shares of Nordstrom (NYSE:JWN) falling 4.8% after it reported soft same-store sales growth on full price merchandise, prompting a downgrade to neutral from buy Goldman Sachs.

Goldman Sachs said Nordstrom's pre-announced holiday sales confirmed a "marked deceleration" in the full-price business, citing weaker store traffic as a concern, as it arrived in a period in which "the consumer is strong and where news from other mall-based retailers on traffic has been more mixed."

The mostly bullish earnings and stable guidance reported so far, has helped the broader market extend gains, though the Fed's Beige Book showed that businesses are starting to feel the pressure of rising input costs, which could compress margin.

"Reports cited rising materials and freight prices as sources of cost increases, and a number of Districts said that higher tariffs were also a factor," the Beige Book showed.

Gains in the broader market were held back, however, on concerns about rising U.S.-China tensions after Bloomberg reported that federal prosecutors are investigating Huawei Technologies for allegedly stealing trade secrets.

Top S&P 500 Gainers and Losers Today:

Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC) and United Continental (NASDAQ:UAL) were among the top S&P 500 gainers for the session.

Ford Motor (NYSE:F), Nordstrom (NYSE:JWN) and Edwards Lifesciences (NYSE:EW) were among the worst S&P 500 performers of the session.