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Wall Street extends rally on strong earnings, economic optimism

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NEW YORK (Reuters) - Wall Street advanced on Wednesday for the second straight day, as strong corporate earnings and renewed optimism about the U.S. economic recovery stoked investor risk appetite.

All three major U.S. stock indexes appeared set to build on the previous session's gains, which delivered the S&P 500's best day since March.

With Wednesday's advance, all three are within 1% of their all-time closing highs.

Economically sensitive smallcaps, semiconductors and financials outperformed the broader market.

"Earnings have been coming in with some nice surprises and the market has responded well to the pullback last week," said Matthew Keator, managing partner at the Keator Group, a wealth management firm in Lenox, Massachusetts.

A rebound in travel helped fuel United Airlines' revenue beat, boosting its stock by 3.2%.

The S&P 1500 Airlines index gained 2.9%, while the S&P 1500 Hotels, Restaurant and Leisure index advanced 3.0%.

"The travel and tourism trade is heavily affected by pent-up demand, people wanting to be out and about and doing things," Keator added. "It will be interesting to see if that starts to wane."

Benchmark U.S. Treasury yields continued their bounce from five-month lows to the benefit of rate-sensitive banks. The S&P 500 Banking index gained 2.4%.

Wrangling in Washington over the passage of a bipartisan $1.2 trillion infrastructure package progressed as Senate Democrats moved toward a planned procedural vote despite Republican appeals for a delay.

The Dow Jones Industrial Average rose 250.35 points, or 0.73%, to 34,762.34, the S&P 500 gained 29.18 points, or 0.67%, to 4,352.24 and the Nasdaq Composite added 93.49 points, or 0.64%, to 14,592.37.

Of the 11 major sectors in the S&P 500, energy stocks were the big winners, the group's 3.9% advance helped by surging crude prices. [O/R]

Second-quarter reporting season has shifted into overdrive, with 73 of the companies in the S&P 500 having posted results. Of those, 88% have beaten consensus expectations.

Current estimates show aggregate year-on-year S&P 500 earnings growth of 75% for the April to June period, a significant jump from the 54% growth seen at the beginning of the quarter.

Among the winners, Chipotle Mexican Grill touched a record high, jumping 12.7% after the burrito chain beat earnings estimates and forecast strong current-quarter sales growth. The stock boasted the S&P 500's largest percentage gain.

Coca-Cola rose 1.2% after raising its full-year forecast.

Verizon Communications advanced 1.1% following its earnings beat, which was attributed to growing demand for its 5G services.

Interpuplic Group of Companies jumped 12.5% in the wake of its upbeat earnings release.

Drugmaker Johnson & Johnson forecast $2.5 billion in sales from its one-shot COVID vaccine this year and hiked its sales estimates. Its was last up a modest 0.2%.

On the losing side, Netflix Inc late Tuesday reported slowing subscriber growth, sending its share down 4.1%, the largest percentage decliner in the S&P 500.

Harley-Davidson's second-quarter earnings release showed its turnaround plan appeared to be making progress, but the company lowered its operating income guidance due to tariffs from Europe, its second-biggest market. Its shares dropped 6.6%.

Advancing issues outnumbered declining ones on the NYSE by a 3.04-to-1 ratio; on Nasdaq, a 3.23-to-1 ratio favored advancers.

The S&P 500 posted 35 new 52-week highs and no new lows; the Nasdaq Composite recorded 55 new highs and 30 new lows.

Reporting by Stephen Culp; Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Cynthia Osterman

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