Stocks Pare Gains; Nasdaq Drops

By Dow Jones Business News, 
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By Tomi Kilgore

U.S. stocks were little changed Tuesday, with the Dow industrials and the S&P 500 index pulling back after earlier hitting all-time intraday highs.

Small-capitalization and technology stocks retreated after bouncing sharply the last couple of sessions.

The Dow Jones Industrial Average edged up 15 points, or 0.1%, to 16711 after hitting an intraday high of 16735.51. The advance put the Dow on course for a fifth-straight gain and a third-straight record close.

The S&P 500 was virtually flat at 1897. It reached an intraday high of 1902.18, topping the previous intraday record of 1897.28 hit on April 4.

The technology-heavy Nasdaq Composite Index lost 12 points, or 0.3%, to 4132, after climbing 2.3% in the previous two sessions.

The Russell 2000 index of small-cap stocks declined 0.8%. The index had fallen 9.2% from a record high on March 4 to a three-month low on Thursday, before running up 3.3% through Monday.

Gary Flam, portfolio manager at Bel Air Investment Advisors, which has $7 billion in assets under advisement, said the underperformance of small-caps and other high-growth momentum stocks is only concerning if it is accompanied by other factors, such as narrowing participation in the broader market's gains. But that's currently not the case, he said.

"It's not something that I'm worried about at the moment," Mr. Flam said. "But it's something I'm monitoring."

Although the S&P 500 is hitting all-time highs, "we're sensing zero euphoria" among investors, said Jim Russell, senior equity strategist at U.S. Bank Wealth Management, with $120 billion in assets under management.

On Tuesday, data showed that retail sales for April barely rose, missing forecasts, while March's increase was revised higher. In addition, import prices for April declined, versus expectations of a slight increase, and business inventories for March rose in line with forecasts.

The yield on the 10-year Treasury note slipped to 2.614% from 2.657% late Monday.

Although the economy isn't as strong as he would like to see, U.S. Bank's Mr. Russell believes it's strong enough to support the market's gains.

"The fundamentals are justifying the record highs," Mr. Russell said. "We believe we have a sustainable recovery under way."

He added that corporate earnings have also provided fuel to the market's rise. With 91% of S&P 500 companies having reported first-quarter results, aggregate earnings per share are now expected to be up 2.2% from year-ago levels, according to FactSet, versus expectations of a 1.2% decline at the end of March. Revenue is seen growing 2.8% from last year, according to FactSet.

"We're finishing first-quarter earnings season, and I think the markets can claim victory in leaping over a low hurdle, in terms of expectations, " Mr. Russell said.

European markets rose, with the Stoxx Europe 600 rising 0.3% to the highest close since January 2008, following a report in The Wall Street Journal that Germany's Bundesbank is open to an array of stimulus measures by the European Central Bank in June.

The euro fell against the dollar for a fifth-straight session.

In Asia, China's Shanghai Composite slipped 0.1% following downbeat housing data, while Japan's Nikkei Stock Average rallied 2% following upbeat earnings news.

Gold futures inched lower by less than 0.1% to $1295.60 an ounce in choppy trading, while crude-oil futures advanced 0.8% to $101.36 a barrel.

Among stock movers, DirecTV eased 0.7%, erasing earlier gains, after The Wall Street Journal reported AT&T is close to sealing a buyout that would value the satellite-television provider at nearly $50 billion. Shares of Dow component AT&T lost 1.2%.

Elizabeth Arden slumped 22% after the beauty-products company reported late Monday a wider fiscal third-quarter loss, disappointing revenue and said it was implementing a broad cost-savings program. The company said it has engaged Goldman Sachs to help explore ways to enhance shareholder value.

Keurig Green Mountain climbed 9.6% after Coca-Cola disclosed late Monday that it has bought another 2.8 million shares of the company within the past week, and reached a deal with Credit Suisse to buy up to 6.5 million more shares within the next nine months. Dow component Coca-Cola advanced 0.8%.

Write to Tomi Kilgore at tomi.kilgore@wsj.com


  (END) Dow Jones Newswires
  05-13-141423ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


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