US STOCKS-S&P 500, Nasdaq extend gains for fourth session ahead of earnings, Fed meeting

By Sinéad Carew and Pranav Kashyap

Jan 26 (Reuters) - The S&P 500 and the Nasdaq were eying their fourth consecutive advance on Monday, as investors geared up for a slew of mega-cap earnings and a Federal Reserve update on interest rate policy later this week.

Both indexes hit their highest levels in more than a week and were on track for their longest string of advances since December.

Gains in a handful of mega-cap names did most of the heavy lifting for the S&P 500, with Apple AAPL.O, Meta META.O, Alphabet GOOGL.O and Broadcom AVGO.O adding over 2% each, while Microsoft MSFT.O was up 1.4%.

Apple, Meta, Microsoft and Tesla TSLA.O are slated to report quarterly results later this week, setting up a key test for a rally powered by euphoria around AI.

Investors will look for signs of measurable payoffs from AI spending. With concerns over high valuations in the tech space, guidance will be especially important and even a modest stumble could spark a rethink about the AI trade.

"You're seeing communications and technology are trading well today in advance of the earnings from a lot of the large companies," said Chris Zaccarelli, chief investment officer of Northlight Asset Management in Charlotte, North Carolina.

"It seems like we're having an expansion in corporate profits and an expansion in the economy, so generally speaking, investors are cautiously optimistic and most likely looking forward to earnings season."

Of the 64 companies in the S&P 500 that had reported earnings as of Friday, 79.7% beat analyst expectations as per data compiled by LSEG.

At 2:15 p.m. EST, the Dow Jones Industrial Average .DJI rose 295.02 points, or 0.60%, to 49,393.73, the S&P 500 .SPX gained 45.85 points, or 0.66%, to 6,961.46 and the Nasdaq Composite .IXIC gained 168.62 points, or 0.72%, to 23,669.87.

Communications services .SPLRCL, up 1.7%, was the biggest gainer among the S&P 500's 11 major industry sectors. The biggest laggard was consumer discretionary .SPLRCD, down 0.4%, with Tesla among its top losers, down 2.4%.

The S&P 500 materials sector .SPLRCM was advancing as gold prices vaulted above $5,000 an ounce for the first time, boosting names such as Gold Fields GFI.N, up 5%, and Harmony Gold HMY.N, up 2.3%.

Also on investors' minds was the Fed meeting, which will end with a policy update on Wednesday afternoon. While traders see a more than 97% probability that the central bank will hold rates steady on Wednesday, investors will watch for clues on its future rate path.

But the decision risks being overshadowed by fresh questions over the central bank's independence after the Justice Department opened a probe into Chair Jerome Powell this month, and President Donald Trump said a pick for the next Fed chair could come soon.

Earlier, Chris Larkin at E*Trade from Morgan Stanley said that "Wednesday's Fed announcement will likely keep politics in the headlines."

In individual stocks, shares of chipmaker Intel INTC.O sank for a second day in a row, down more than 5% on Monday, after falling 17% on Friday for their steepest drop in nearly 18 months after the company forecast quarterly profit and revenue below estimates.

Meanwhile, airline stocks pared earlier losses as they dealt with the aftermath of mass disruptions in flight schedules after a massive winter storm hit the Eastern United States. United Airlines UAL.O was last down 0.1% while JetBlue JBLU.O was off 3%.

Shares of USA Rare Earth USAR.O were up 16% after reports that the U.S. administration was taking a 10% stake in the miner as part of a $1.6 billion debt-and-equity investment package.

Among other stock moves, CoreWeave CRWV.O jumped about 9% after Nvidia NVDA.O said it would invest $2 billion in the cloud infrastructure firm.

Advancing issues outnumbered decliners by a 1.33-to-1 ratio on the NYSE, where there were 551 new highs and 53 new lows. On the Nasdaq, 2,294 stocks rose and 2,398 fell as declining issues outnumbered advancers by a 1.05-to-1 ratio.

The S&P 500 posted 21 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 82 new highs and 81 new lows.