By Dan Strumpf And Saumya Vaishampayan
U.S. stocks pushed higher Monday, erasing early losses, with
both the Dow industrials and the S&P 500 on track for new
all-time highs.
The Dow Jones Industrial Average gained 50 points, or 0.3%, to
18322 in afternoon trading, putting the benchmark on course for its
first all-time high since March 2.
The S&P 500 index gained eight points, or 0.4%, to 2130, on
track for its ninth record close of the year. The Nasdaq Composite
Index climbed 32 points, or 0.6%, to 5081, still shy of its April
24 record of 5092.09.
While the S&P 500 has notched all-time highs in recent
sessions, hitting two in a row last week, the moves have been
relatively small. Last week, the Dow rose just 0.4% and the S&P
added 0.3%. The quiet trading has so far continued into Monday,
traders said.
"We're on the back side of earnings--that's basically done,"
said Gordon Charlop, managing director at Rosenblatt Securities.
"The question is what is it that's going to generate some
enthusiasm, one way or the other, negative or positive? Right now
there's nothing you can say is headline grabbing."
Part of the blame for the more modest moves in stocks goes to
weak economic data, strategists say, as tepid reports dim the
outlook for earnings growth and future stock-market gains. Recent
data showed a sharp drop in consumer sentiment and a further
decline in industrial production.
The weak reports "make this year's earnings growth rate very
difficult to assess," said Gail Dudack, chief investment strategist
at Dudack Research Group, a division of brokerage Wellington
Shields & Co.
"Since multiples are slightly above average, it's been our view
that we will need earnings growth for stocks to move higher," she
added.
The S&P 500 now trades at 18 times the last 12 months of
earnings, according to FactSet, compared with a 10-year average P/E
ratio of 15.8.
The high valuations have some investors nervous. Ralph Segall,
chief investment officer at Segall Bryant & Hamill, a $9.7
billion Chicago money manager, said the amount of cash he holds has
drifted higher in recent months in part because he was wary of
buying stocks at lofty valuations.
"We've had a hard time finding stuff to buy," he said. "We have
to discipline ourselves to put [the cash] back into some of our
names, but we're doing it without a whole lot of enthusiasm."
Including results from 465 companies in the S&P 500,
first-quarter earnings are on track to grow nearly 0.5% from a year
ago, according to FactSet. That's an improvement over the nearly 5%
decline projected by analysts at the start of earnings season.
European stocks recovered from early losses. France's CAC 40
finished 0.4% higher, while Germany's DAX gained 1.3%.
Housing data was in focus Monday. A reading from the National
Association of Home Builders showed confidence in May fell two
points to a reading of 54. The figure came in below expectations of
58.
In commodity markets, gold futures added 0.2% to $1227.80 an
ounce. Crude-oil futures fell 0.4% to $59.43 a barrel.
Treasury prices slipped, lifting the 10-year yield up to 2.215%
from 2.141% on Friday.
In corporate news, Endo International PLC has agreed to buy Par
Pharmaceutical Holdings Inc. from private-equity firm TPG for about
$8 billion in cash and stock. Endo shares fell 3.1%.
Shares of Ann Inc. soared 19% after the retailer agreed to sell
itself to Ascena Retail Group Inc. for $2.2 billion in cash and
stock. Ascena shares fell 4.3%.
Shares of Eleven Biotherapeutics Inc. plunged 70% after the
company said its late-stage dry eye disease treatment failed to
meet its two primary endpoints.
Shares of Apple Inc. gained 1.4% after activist-investor Carl
Icahn raised his price target on the stock by 11% to $240 and
reiterated his call for the iPhone maker to buy back shares at a
faster rate.
Write to Dan Strumpf at daniel.strumpf@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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