By Will Horner
U.S. stocks rose Wednesday, led by shares of Netflix and other communication companies.
The S&P 500 added 0.7%, while the tech-heavy Nasdaq Composite advanced 1.2%. The Dow Jones Industrial Average were up 133 points to 31062.
Netflix led Wednesday's gains after the streaming giant reported that total subscribers topped 200 million at the end of last year, giving it enough cash to fund further growth without having to dip into more debt. Shares jumped more than 12% to lead the S&P 500 higher and sparked a broader rally among its streaming competitors, including Disney, Amazon.com and Roku.
The advance has so far solidified the stock market's upbeat week ahead of the inauguration of Joe Biden, starting at noon Wednesday. Investors remain optimistic that fiscal stimulus is supporting businesses through the damage wrought by the Covid-19 pandemic, with expectations of further spending by Democrats to keep the economy on track.
That will pressure companies to deliver during this earnings season and meet the market's expectations, said Brian O'Reilly, head of market strategy at Mediolanum Investment Funds.
"Any company that is likely to miss or modestly disappoint on earnings will be punished quite heavily," said Mr. O'Reilly. "A lot of optimism has already been priced in and typically you don't get too much room for maneuver when a stock is at a historic high."
Shares of UnitedHealth, for example, fell 1.3% after the health-care company reported a smaller profit in the last quarter of 2020.
Still, investors remain willing to reward companies that top Wall Street's forecasts. Besides Netflix, shares of Morgan Stanley added 1.5% after the bank reported a 51% increase in fourth-quarter profit from a year earlier,
As earnings reports pick up, focus is likely to center on sectors most exposed to the U.S. economy, such as banks and energy companies, and those which have suffered the most during the pandemic, such as leisure and hospitality, said Hugh Gimber, a strategist at J.P. Morgan Asset Management.
"The most interesting thing will be how much leveling-off do we see, how much are last year's laggards able to catch up," he said.
Overseas, the Stoxx Europe 600 index rose 0.7%. Shares of Pearson rose nearly 6% after the British education publisher reported sales growth, in part due to the increase in online learning during the pandemic.
In Asia, stocks indexes were mixed. The Nikkei 225 ended the day down 0.4%, while the Shanghai Composite Index rose 0.5%. Chinese internet giant Alibaba jumped 8.5% in Hong Kong after the company's embattled owner, Jack Ma, made his first public appearance in three months, ending concerns about his whereabouts.
In Hong Kong, the Hang Seng Index gained 1.1% to hit a 20-month high, with stocks buoyed in recent days by hefty inflows from mainland China.
-- Michael Wursthorn contributed to this article.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
January 20, 2021 10:12 ET (15:12 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.