By Saumya Vaishampayan
A rebound in shares of health-care companies propelled U.S. stocks higher Wednesday.
The Dow Jones Industrial Average rose 122.10 points, or 0.7%, to 16912.29.
The S&P 500 advanced 15.91 points, or 0.8%, to 1995.83, and the Nasdaq Composite gained 42.79 points, or 0.9%, 4791.15.
Health-care stocks in the S&P 500 rose 1.5% after a sharp selloff in those shares snapped the index's five-day winning streak on Tuesday. The yearslong rally in health-care shares took a turn in August as the broader market pulled back, and fears of legislation targeting drug pricing deepened losses. The sector has fallen 12% from its high for the year, set in July, and has slipped 0.9% for the year.
Still, investors note that profits at certain health-care companies likely won't be dragged down by a slowdown in global growth, an issue in the third-quarter reporting season. "If you are trying to be very tactical, it wouldn't be a bad move to go into health care, particularly because prices are so much cheaper than they were," said Jennifer Ellison, a principal at Bingham, Osborn & Scarborough, which manages $3.4 billion.
Investors are now waiting for the bulk of third-quarter earnings before adjusting their portfolios, traders said. "We're in a bit of a news vacuum," said Brett Mock, managing director at brokerage JonesTrading Institutional Services LLC.
Third-quarter profits for S&P 500 companies are forecast to fall 5.1% from a year ago, according to FactSet, led by declines in energy earnings. Investors also will parse reports to see whether the slowdown in China is spilling over into profits or expectations for U.S. companies that sell goods overseas.
Yum Brands, which owns Pizza Hut and KFC, cut its earnings outlook for the year after disappointing quarterly results in its China and India operations. Shares fell $15.71, or 19%, to $67.71.
"If you get a big name or two coming out with a bad earnings report or bad outlook, we are at a precarious enough point in the market where that could send things back down," said Ms. Ellison from Bingham, Osborn & Scarborough.
Energy stocks in the S&P 500 rose 1.3%, adding to their rally this month as U.S. oil prices have advanced. Still, for the year, those stocks have fallen 15%.
"There's been a shift away from some of the winners and into sectors that have been beaten up," such as energy stocks, said Sahak Manuelian, a managing director at Wedbush Securities.
The Stoxx Europe 600 edged up 0.1%.
Stocks rose in Asia. Japan's Nikkei 225 gained 0.8%. Shares in Hong Kong's Hang Seng Index gained 3.1% after Chinese authorities reported that foreign-exchange reserves fell by a slower pace in September.
The slower pace of reserves falling "provides some comfort" to investors worried about the Chinese economy, said Edwin Gutierrez, head of emerging-market sovereign debt at Aberdeen Asset Management, which oversees GBP307 billion ($466 billion) in assets.
That, combined with a growing consensus among investors that the U.S. Federal Reserve will hold off on raising interest rates until next year, has "put a spark under risk assets," he said.
Global stocks rallied after a U.S. jobs report pushed back investors' expectations for the Fed to raise interest rates. Ultralow interest rates have helped boost global stocks in recent years.
The yield on 10-year U.S. Treasurys rose to 2.061% from 2.033% on Tuesday. Yields rise as prices fall.
In commodity markets, gold prices added 0.2% to $1149.00 an ounce. U.S. oil prices slipped 1.5% to $47.81 a barrel.
Elsewhere, flash-storage company Pure Storage opened below its initial public offering price of $17 a share. The stock fell 99 cents, or 5.8%, to 16.01.
Christopher Whittall and Riva Gold contributed to this article.
Write to Saumya Vaishampayan at email@example.com.