US STOCKS-Wall Street indexes close higher ahead of earnings, Fed meeting

By Sinéad Carew and Pranav Kashyap

Jan 26 (Reuters) - The S&P 500 and the Nasdaq advanced for a fourth consecutive session 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 registered 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, Microsoft MSFT.O, Alphabet GOOGL.O, Meta META.O and Broadcom AVGO.O offering the benchmark's top boosts.

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.

The Dow Jones Industrial Average .DJI rose 313.69 points, or 0.64%, to 49,412.40, the S&P 500 .SPX gained 34.62 points, or 0.50%, to 6,950.23 and the Nasdaq Composite .IXIC gained 100.11 points, or 0.43%, to 23,601.36.

Communications services .SPLRCL finished up 1.3% and was the biggest gainer among the S&P 500's 11 major industry sectors while consumer discretionary .SPLRCD was the biggest laggard with a 0.7% decline. The S&P 500's biggest drag was Tesla, which ended down 3%.

The S&P 500 materials sector .SPLRCM rose 0.3% as gold prices vaulted above $5,000 an ounce for the first time, boosting names such as Newmont Corp NEM.N, which finished up 1.3%.

Also on investors' minds was the Fed meeting, which starts on Tuesday and ends with a policy update on Wednesday afternoon. Traders see a roughly 97% probability that the central bank will hold rates steady, according to CME Group's FedWatch, but investors will hope for clues on its future rate path.

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

In individual stocks, shares of Intel INTC.O sank 5.7% after falling 17% on Friday for their steepest drop in nearly 18 months after the chipmaker forecast quarterly profit and revenue below estimates.

Meanwhile, JetBlue JBLU.O dropped 3.8% as the airline sector dealt with the aftermath of mass disruptions in flight schedules after a massive winter storm hit the United States.

Shares of prison operators GEO Group GEO.N and CoreCivic CXW.N, which have contracts with U.S. Immigration and Customs Enforcement, fell sharply as U.S. Senate Democrats said they will oppose a funding bill for the Department of Homeland Security, which oversees ICE.

The fatal shooting of a 37-year-old nurse, Alex Pretti, in Minneapolis on Saturday has escalated a public backlash against Trump's approach to immigration. GEO shares fell 9.3% for their biggest daily loss since August and CoreCivic fell 7%, its biggest drop since November.

Shares of USA Rare Earth USAR.O rallied 7.9% 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.

Elsewhere CoreWeave CRWV.O climbed 5.7% after Nvidia NVDA.O said it would invest $2 billion in the cloud infrastructure firm.

Advancing issues outnumbered decliners by a 1.37-to-1 ratio on the NYSE where there were 631 new highs and 63 new lows. On the Nasdaq, 2,360 stocks rose and 2,465 fell as declining issues outnumbered advancers by a 1.04-to-1 ratio.

On U.S. exchanges 18.41 billion shares changed hands on Monday compared with the 17.60 billion 20-day average.