By Corrie Driebusch
The Dow industrials climbed to a fresh record high Tuesday for
the second session in a row.
Throughout the day stocks wavered between slight gains and
losses, with the Dow Jones Industrial Average and the S&P 500
narrowly hitting new intraday highs around midday. The S&P 500
finished marginally lower, snapping a three-day climb to record
highs.
The Dow industrials added 13.51 points, or 0.1%, to 18312.39 on
Tuesday, while the S&P 500 slipped 1.37 points, or 0.1%, to
2127.83 and the Nasdaq Composite Index lost 8.41 points, or 0.2%,
to 5070.03.
On Monday the Dow notched its first closing high since March 2.
The Dow has risen 2.6% in May and is up 2.7% for the year. The
S&P has gained 2% this month and 3.3% in 2015.
Despite the market's climb to records, traders and strategists
said there isn't any clamoring by investors to put more money into
stocks.
"We continue to get the question from clients of how can the
markets keep reaching new highs," said Sean Lynch, co-head of
global equity strategy for Wells Fargo Investment Institute.
"There's nervousness among investors, and that's a good thing.
They're not blindly rushing into stocks."
U.S. housing starts rose 20.2% in April from a month earlier to
an annual rate of 1.135 million, the Commerce Department said
Tuesday. That was the highest reading since November 2007.
Economists surveyed by The Wall Street Journal expected April
housing starts to reach a rate of 1.01 million.
"The housing starts were very impressive, and they may lead some
people to think weak first-quarter GDP numbers were temporary,"
said Mr. Lynch.
Following the housing starts data, U.S. Treasury bonds sold off.
The yield on the 10-year Treasury note rose to 2.262% from 2.228%
on Monday.
As yields on the 10-year Treasury note climbed, so did shares of
bank stocks. Investors tend to buy up bank stocks as Treasury
yields rise, as higher bond yields can allow banks to earn more
income from lending.
Financial stocks in the S&P 500 added 0.6% on Tuesday,
making them the best performing sector in the index.
Some money managers say there is more room for gains in U.S.
stocks.
"Stocks are selling above their historical average, there's no
question about that," said Hank Smith, chief investment officer of
Haverford Trust, which has about $6.5 billion under management.
"But given the low level of interest rates and the low level of
inflation, stocks are fairly valued."
U.S. stocks followed international markets higher Tuesday.
European stocks and bonds surged after the European Central Bank
published comments delivered by board member Benoît Coeuré saying
the central bank would moderately front-load purchases in its
bond-buying program in anticipation of less market liquidity in the
summer. Mr. Coeuré added that the central bank would maintain its
monthly average of EUR60 billion ($68.35 billion) in bond
purchases. Germany's DAX rallied 2.2% and France's CAC 40 advanced
2.1%. The euro dropped against the dollar in the wake of the
comments, down 1.5% to $1.1150.
Stocks rose in China after Beijing approved six rail projects
amounting to a total investment of 243.8 billion yuan (about $39.3
billion) and said it would speed up reform in the finance
sector.
Several retailers are scheduled to report earnings this week.
Recent reports have showed flat retail sales in April and a drop in
consumer sentiment. "The consumer still seems to be hibernating,"
said Haverford Trust's Mr. Smith.
Wal-Mart Stores Inc. on Tuesday reported weaker-than-expected
sales and a 7% drop in profit. The company logged its
third-straight quarter of U.S. same-store sales growth. Shares fell
4.4%.
TJX Cos. raised its annual guidance and reported that its
earnings rose 4.5% on better-than-expected sales and improved
margins during the quarter ended in April. Shares climbed 2.9%.
In commodity markets, gold futures declined 1.7% to $1206.90 an
ounce. Crude-oil futures lost 3.7% to $57.26 a barrel.
Josie Cox and Saumya Vaishampayan contributed to this
article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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