The stock market seemed dull Tuesday if viewed through the prism of the three major indices. But there was drama on closer inspection, as one of the broadest measures of U.S. stocks made an all-time high.
The NYSE Composite Index closed up 0.4% to a record 9468.70, while the three so-called major indices inched higher. The
finished the day up 0.3% to close at 1448.39, knocking at the door of its pre-Feb. 27 level, which would erase the losses stemming from that panic-stricken day. The S&P closed on Feb. 26 at 1449.37. The index is closing in on its high for the year and the high from the most recent rally, which was 1459.68 made on Feb. 20.
Dow Jones Industrial Average
gained 0.04% to close at 12,573.85, and the
closed up 0.3% Tuesday to close at 2477.61.
Stocks seemed stuck in a waiting game -- waiting for earnings season, which kicked off with stronger-than-expected results after the close from
, and waiting for Wednesday's release of the minutes from last month's
Federal Open Market Committee
meeting. But the march onward and upward continued, and more highs may not be far behind.
"We should expect the S&P 500 to make a new high," says Philip Roth, chief technical analyst at Miller Tabak, who says it is "normal procedure" after a pullback as occurred late February/early March for some indices to make new highs.
But Roth warns that investors shouldn't take new highs to necessarily mean the start of a new phase of the rally. The recent gains are disconcerting because they're made on light trading volume. "This rally is a function of limited selling pressure, rather than increasing buying pressure," Roth says. Volume needs to improve, "or the market will roll over due to exhaustion."
The wait for earnings season "officially" ended after the closing bell Tuesday. Alcoa beat Wall Street expectations, reporting total earnings of 79 cents per share, vs. expectations for 76 cents. Revenue was stronger than expected, and net income was up 9% in the first quarter. Alcoa was up 0.09% in Tuesday's session, and recently up 1.4% in postclose trading.
Alcoa's report is yet another feather in the economic bulls' camp, piling onto a better-than-expected jobs report last Friday and last month's better-than-expected revision to first quarter GDP.
"The drum roll continues," says John Bollinger, president of Bollinger Capital. "Every time you turn around there is news that is better than expected, and it carries stocks higher."
One report that was not better than expected, but probably not much worse either came from
, which reported a 37% year-over-year drop in orders. Chief Executive Donald R. Horton warned that the spring selling season "has not gotten off to its usual strong start." D.R. Horton fell 1.5%.
But expectations are so low for the housing sector that much of the bad news is priced in, says Bollinger.
The housing sector overall fared poorly Tuesday as the International Monetary Fund dampened hopes for recovery. The IMF expressed concern in its semiannual Global Financial Stability Report that the subprime mortgage problems may spill over into the broader economy. The Philadelphia Housing Sector Index fell 0.5% Tuesday.
Once again, it was energy and cyclically sensitive stocks holding up the indices Tuesday. Oil prices gained 0.6% and natural gas gained over 4% on the day.
added 4.2% and
marked a new all-time closing high, up 2.1% on the day.
In the Treasury market, where worry never fades, investors turned their attention to inflation as two Fed officials spoke hawkish words Tuesday -- a day ahead of the FOMC minutes. The 10-year Treasury bond ended the day up a meager 5/32 to yield 4.72%.
"We're going to be especially vigilant on the inflation front," Dallas Fed President Richard Fisher said in a speech in Texas. "I'm among those that believe we have more to do."
In a speech in Bridgewater, Va., Fed Governor Frederic Mishkin said "the inflation rate is higher than what I would like to see." But Mishkin supported the notion that the Fed may sacrifice slightly higher inflation to ensure solid economic growth. "While restoring price stability remains critical, the central bank should do so at a pace that does not do undue harm to the economy," he said.
These views "indicate the Fed will be on hold quite a while, with a risk that they would ease if growth goes wobbly," writes T.J. Marta, fixed-income strategist at RBC Capital Markets.
The market will be watching the FOMC minutes Wednesday for clues to the Fed's future moves and for insight into the somewhat cryptic message from the March meeting. How can the Fed be both vigilant about inflation, while also willing to sacrifice higher inflation to protect the economy? Surely the minutes will reveal more about the central bank's bias and surely the markets will react.
In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click
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