The Standard & Poor's 500 Index climbed to a record, bolstered by gains in banks after better-than-expected UBS earnings, while disappointing earnings for McDonald's and an unexpected drop in US home sales underpinned expectations the Federal Reserve won't be in a rush to taper its bond-buying program.
In late afternoon trading in New York, the Standard & Poor's 500 Index rose 0.11 per cent, while the Nasdaq Composite Index gained 0.15 per cent. Earlier in the session, the S&P 500 touched a record 1,697.61.
US bank shares gained, with the KBW Bank Index last up 0.74 per cent, as Switzerland's UBS posted second-quarter profit that surpassed forecasts and said it reached an agreement in principle with a US regulator to settle claims over US mortgage-backed bond sales.
The Dow Jones Industrial Average edged 0.08 per cent lower, as a 2.7 per cent drop in shares of McDonald's weighed on the index. McDonald's reported quarterly profit and revenue that fell short of forecasts and warned of further headwinds for full-year earnings.
"Based on recent sales trends, our results for the remainder of the year are expected to remain challenged," chief executive Don Thompson said in a statement.
So far US corporate earnings have surpassed modest expectations this quarter.
About 71 per cent of Standard & Poor's 500 Index members that have reported second-quarter results so far topped analysts' income estimates, data compiled by Bloomberg show.
"There was concern that the economy may be doing a little better than the Fed was estimating and that might lead to an earlier tapering," John Carey, a fund manager at Boston-based Pioneer Investment Management, told Bloomberg News. "Now with fairly modest economic growth and slow earnings growth, I don't think people are going to be as worried about the tapering."
Indeed, US home sales unexpectedly fell 1.2 per cent to an annual rate of 5.08 million units in June, according to National Association of Realtors data. Still, it was the second-highest sales pace since November 2009.
"Affordability conditions remain favourable in most of the country, and we're still dealing with a large pent-up demand," Lawrence Yun, NAR chief economist, said in a statement. "However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market."
Guy Berger, an economist at RBS in Stamford, Connecticut, shared Yun's optimism about sustained momentum in the American housing market.
"The rise in mortgage rates is a headwind, but it's probably not enough to derail the home sales recovery. The fundamentals in the market are still very good," Berger told Reuters.
In Europe, the Stoxx 600 Index rose 0.2 per cent. France's CAC 40 gained 0.4 per cent, while Germany's DAX was steady. The UK's FTSE 100 fell 0.1 per cent.
Gold rose, with futures climbing as much as 3.2 per cent to US$1,335.70, the highest level in a month.
"We are seeing some support for gold as [Fed Chairman Ben] Bernanke's statements tell us that the Fed wants to see a visible improvement in economic conditions before they begin tapering," Michael Cuggino, who manages US$12 billion of assets at Permanent Portfolio Family of Funds in San Francisco, told Bloomberg News. "The longer-term reasons for owning gold, like capital preservation, remain as easy money will continue to flow into the system."