US stock market hits new record
The US stock market returned to record levels yesterday as investors regained their appetite for riskier stocks.
After beating down Internet and small companies for two months, investors decided that those stocks had fallen enough.
Among the big gainers were Twitter and Facebook, which had plunged in March and April. The Russell 2000, an index made up of small companies, climbed the most in two months.
Investors have been more cautious this year than last. They have favoured big, less volatile stocks that pay rich dividends because of concerns about the outlook for the economy.
Utility and energy companies have been among the beneficiaries of this trend, and have outperformed the overall market in 2014.
While interest rates remain low, investors will probably keep getting drawn back into stocks after any sell-off because holding cash is not generating any returns, said Tim Courtney, chief investment officer at Exencial, an independent wealth management company.
“There is some bargain buying in some of the names that got hit hard in March and April,” he said.
Yesterday, the Standard & Poor’s 500 index rose 18.17 points, or 1%, to finish at an all-time high of 1,896.65. The index last closed at a record high on April 2, when it reached 1,890.90.
The Dow Jones industrial average gained 112.13 points, or 0.7%, to end at 16,695.47 ysterday. The Dow’s previous record high was 16,583.34 on Friday.
The Nasdaq climbed 71.99 points, or 1.8%, to 4,143.86.
The Russell 2000 index rose 26.4 points, or 2.4%, to 1,133.65, its biggest gain since March 4. The index had slumped almost 10% from March 4 to Friday as investors sold riskier stocks.
The index still remains down 2.6% for the year after surging 37% in 2013.
Gains yesterday were led by technology and industrial companies, sectors that are expected to benefit most if the economy starts growing faster.
Facebook rose 2.59 dollars, or 4.5%, to 59.83 dollars, reducing the stock’s decline since March 10 to 17%.
Twitter, another stock that has been beaten down recently, rose 1.89 dollars, or 5.9%, to 33.94 dollars.
Stocks also got a boost from some merger news.
Pinnacle Foods surged 4.02 dollars, or 13.2%, to 34.47 dollars after the company agreed to be acquired by Hillshire Brands.
Pinnacle’s brands include Duncan Hines and Aunt Jemima, while Hillshire makes Jimmy Dean and Sara Lee products. Hillshire fell 1.19 dollars, or 3.2%, to 35.76 dollars.
Even though stocks have largely moved sideways for most of the year following a surge in 2013, investors are still more concerned about missing the next leg of a rally than a market fall, said Doug Cote, chief market strategist, Voya Investment Management.
In government bond trading, prices fell. The yield on the 10-year Treasury note climbed to 2.66% from 2.63% on Friday.
Bond yields started falling at the start of the year as an unusually harsh winter put the brakes on the US economy. They have continued to fall even as reports show the economy is strengthening again.
“There are a number of mysteries out there in the market,” said Gerry Paul, chief investment officer of US value equities at AllianceBernstein.
“To me, one of the biggest is why the 10-year Treasury is trading where it is.”
