NEW YORK, Oct 24 (Reuters) - U.S. industrial sector roared to a record high on Tuesday following strong financial results from stalwarts 3M Co and Caterpillar Inc, even as shares of General Electric Co continued to struggle.
The S&P 500 industrials index rose 0.7 percent, leading all major groups. Other sectors that are particularly dependent on economic growth, such as financials and materials, also gained.
Results showed a rebound for industrial companies whose shares have been under pressure the past couple of years as many of their key markets, such as energy, mining and agriculture, have struggled, said Edward Jones industrials analyst Matt Arnold.
“What we are seeing in 2017 is a significant snap back in demand. It is driving higher sales at a time when these companies have done a lot to lean themselves out and tighten their belts,” Arnold said.
“What all this means is these companies are translating the sales snap-back into significant earnings growth and it is driving the stocks,” he said.
Shares of diversified manufacturer 3M and heavy machinery maker Caterpillar led the sector’s gains, with both rising more than 5 percent after their results both easily topped Wall Street’s estimates for sales and earnings.
The two stocks also propelled the blue-chip Dow Jones Industrial Average to a record high.
Caterpillar’s results helped boost shares of agriculture equipment maker Deere & Co, while shares of Stanley Black & Decker climbed about 4 percent after the power tool maker’s results.
General Motors Co shares meanwhile rose more than 1 percent after the automaker’s profit topped estimates. GM’s stock is part of the consumer discretionary sector but its results are seen as an indicator of the health of industrial manufacturing.
Tuesday’s gains for the cyclical sectors signaled a potential rotation in the stock market. Shares of technology and healthcare companies, whose profits are more resistant to economic downturns, have led this year’s market rally.
Not all industrial stocks gained on Tuesday. Lockheed Martin Corp shares fell 2 percent after the weapons supplier’s results, while United Technologies’ shares were little changed after the conglomerate’s report.
Notably, shares of GE, the largest publicly traded industrial company, were down 1 percent, continuing their slide after the conglomerate reported earnings that fell far short of Wall Street expectations on Friday. (Reporting by Lewis Krauskopf; Editing by Meredith Mazzilli)