S&P 500, Dow Come Off Highs but Still Within Reach of Records

The S&P 500 and Dow Jones Industrial Average hit record highs on Tuesday as investors turn bullish on the U.S. economy.
By Keris Alison Lahiff ,

The S&P 500 and Dow Jones Industrial Average hit record highs on Tuesday as investors turned bullish on the U.S. economy. 

The S&P 500 was up 0.43%, off session highs though still within reach of the intraday record of 2,151 set earlier in the day. The Dow climbed 0.37% and at one point on Tuesday traded above its all-time closing and intraday highs. The Nasdaq added 0.5% to erase all 2016 losses.

The S&P 500 closed at a record high for the first time in 14 months on Monday, building upon major gains enjoyed at the end of last week. Stocks had been lifted by a better-than-expected U.S. jobs report for June which brought relief over the state of the U.S. economy.

A rally in Japanese equities contributed to the good mood on Wall Street on Tuesday. The Nikkei 225 index jumped more than 2% as traders awaited details of Japanese Prime Minister Shinzo Abe's fiscal stimulus package.

Alcoa (AA) - Get Report reported earnings on Monday afternoon, unofficially kicking off the earnings season. The aluminum producer beat earnings and revenue estimates in its second quarter even as sales dropped. The company earned an adjusted 15 cents a share, above expectations of 9 cents. Revenue slid 10% to $5.3 billion but came in higher than forecasts of $5.2 billion. Alcoa shares were up nearly 4%.

The second-quarter earnings season is likely to be another quarter in decline, pulling S&P 500 companies into their longest earnings recession since the start of the financial crisis. U.S.-listed companies have seen profits decline for five straight quarters, according to FactSet. But this might be the beginning of the end to this losing streak.

"The best thing to say about this streak, the longest since 2008, is that the drop will likely confirm that the 5% year-over-year decline in the first quarter of 2016 marked a trough," said Burt White, chief investment officer for LPL Financial. "Signs are pointing to better times ahead."

Job openings in May fell to their lowest level of 2016, according to the Labor Department. Openings fell by 345,000 to a seasonally-adjusted 5.5 million, down from a record high set in April. The Job Openings and Labor Turnover Survey showed the hiring rate steady at 3.5%. 

Tesla (TSLA) - Get Report was on watch after the Securities and Exchange Commission reportedly opened an investigation into its failure to disclose a fatal accident involving one of its vehicles. A crash in Florida in early May was likely the result of the vehicle's autopilot feature which failed to recognize ongoing traffic. Tesla said in a statement it has not received word from the SEC over an investigation.

Amazon.com (AMZN) - Get Report hosts its second annual Prime Day on Tuesday, a sales event that racks up more sales than Black Friday. Amazon expects this year's event to generate more sales than its debut last year.

AMC Entertainment (AMC) - Get Report announced Tuesday that it has agreed to acquire London-based Odeon& UCI Cinemas from private-equity firm Terra Firma. Odeon has 242 theaters and 2,236 screens, making it the largest theater chain in the U.K., Ireland, Italy and Spain. The deal, which is worth 921 million pounds, is expected to close by the end of the year.

Xerox (XRX) - Get Report jumped more than 1% on reports it is pursuing a deal with R.R Donnelley & Sons (RRD) - Get Report . The printing company would reportedly acquire R.R. Donnelley and then split it among its business units ahead of a planned split into two publicly-traded entities. Xerox intends to split its office equipment unit from its services offerings.

Starbucks (SBUX) - Get Report has raised the price of some of its beverages, including its brewed coffee, espresso and tea lattes. The coffee chain said the price of its brewed coffee beverages had increased by 10 cents to 20 cents. The price increases are expected to boost the amount each customer spends per visit by roughly 1%.

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Oracle (ORCL) - Get Report was upgraded to outperform from market perform with a $47 price target at BMO Capital. Analysts said the company can execute better and grow operating income.

Pinnacle Foods (PF) was upgraded to buy with a $57 price target at Goldman Sachs. Earnings estimates also were increased.

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