Prof­its prod mar­kets to new high

The Denver Post - - BUSINESS - By Stan Choe Mark Lennihan, The As­so­ci­ated Press

NEW YORK» U.S. stock in­dexes re­turned to records Tues­day as cor­po­rate prof­its con­tinue to come in bet­ter than an­a­lysts ex­pected.

McDon­ald’s and Cater­pil­lar were among the big com­pa­nies that re­ported health­ier-than-fore­cast re­sults. Sharp moves higher in prices for oil, met­als and other com­modi­ties also helped lift com­pa­nies that pro­duce en­ergy and raw ma­te­ri­als. That more than off­set losses for health care com­pa­nies and stocks that pay rel­a­tively big div­i­dends, which were hurt by a rise in Trea­sury yields.

The Stan­dard & Poor’s 500 rose 7.17 points, or 0.3 per­cent, to an all-time high of 2,477.13. It was the first gain for the in­dex in four days.

The Dow Jones in­dus­trial av­er­age rose 100.26, or 0.5 per­cent, to 21,613.43. The Nas­daq com­pos­ite added 1.37 points, or less than 0.1 per­cent, to 6,412.17, and the Rus­sell 2000 in­dex of small-cap stocks gained 12.33, or 0.9 per­cent, to 1,450.39. Both the Nas­daq and Rus­sell set records.

Lead­ing the way for the mar­ket were en­ergy stocks, which ben­e­fited from a sec­ond strong day for the price of oil. Bench­mark U.S. crude rose $1.55, or 3.3 per­cent, to set­tle at $47.89 per bar­rel. Brent crude, the in­ter­na­tional stan­dard, gained $1.60, or 3.3 per­cent, to $50.20 a bar­rel.

That helped en­ergy stocks in the S&P 500 climb 1.3 per­cent, tied for the big­gest gain among the 11 sec­tors that make up the in­dex. Devon En­ergy rose $1.24, or 3.9 per­cent, to $32.98, for ex­am­ple, while Marathon Oil gained 46 cents, or 3.9 per­cent, to $12.34.

Fi­nan­cial stocks were also strong af­ter a pickup in in­ter­est rates raised ex­pec­ta­tions that banks could charge more for loans and pocket big­ger prof­its.

The yield on the 10-year Trea­sury note climbed to 2.32 per­cent from 2.26 per­cent late Mon­day. The twoyear yield climbed to 1.38 per­cent from 1.36 per­cent, and the 30-year yield rose to 2.91 per­cent from 2.83 per­cent.

The rise in yields came as the Fed­eral Re­serve be­gan a two-day pol­icy meet­ing on in­ter­est rates. The cen­tral bank has al­ready raised rates three times since De­cem­ber, but few in­vestors ex­pect it to make an­other move when it an­nounces its de­ci­sion Wed­nes­day. Most ex­pect the next rate in­crease to come later this year.

It may not have shown on Tues­day, but many in­vestors are brac­ing for mar­kets to get shakier as the Fed­eral Re­serve moves fur­ther away record-low in­ter­est rates and big stim­u­lus for the econ­omy. Con­trar­i­ans are also con­cerned about how much the stock mar­ket has climbed, and how smooth the ride has been, as ex­pec­ta­tions have built up this year for cor­po­rate prof­its will keep pil­ing higher.

“There’s a lot of hope built into the mar­ket at cur­rent lev­els,” said Rob McIver, portfolio man­ager at the $6.3 bil­lion Jensen Qual­ity Growth fund. “We’re cau­tion­ing in­vestors to be cautious and con­ser­va­tive.”

Tech­nol­ogy stocks have been the year’s big­gest stars so far, as in­vestors have been hun­gry for any­thing with the po­ten­tial to grow quickly in a slow-grow­ing global econ­omy. But tech stocks in the S&P 500 dipped 0.2 per­cent Tues­day af­ter sev­eral re­ported re­sults that fell short of ex­pec­ta­tions.

On the op­po­site side was Cater­pil­lar, which jumped $6.36, or 5.9 per­cent, to $114.54 af­ter re­port­ing bet­ter re­sults for the lat­est quar­ter than an­a­lysts ex­pected. It also raised its fore­cast for rev­enue and profit for the full year.

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