U.S. equities bagged new record highs on Tuesday - returning triumphant from a long holiday weekend - as the Dow Jones Industrial Average closes in on the 21,000 level. The historic "creeper" uptrend continues as volatility disappears: It's been some 50 days since the last 1% pullback.
In the end, the Dow gained 0.6%, the S&P 500 added 0.6%, the Nasdaq Composite gained 0.5% and the Russell 2000 ended 0.8% higher. Treasury bonds weakened, the dollar was stronger, gold finished little changed and oil was higher, but finished off its best levels ahead of Wednesday's OPEC production-cut compliance meeting.
Defensive, yield-sensitive issues led the way and belied the "risk on" atmosphere suggested by the headline gains. REITs rose 1.4%, utilities rose 1.1% and consumer staples were up 1%. Materials and financials, recent areas of strength, were the laggards with gains of 0.4% and 0.5%, respectively.
Newsflow was light, leaving M&A headlines to generate the excitement. Popeye's Louisiana Kitchen Inc (NASDAQ: PLKI ) gained 19.1% after agreeing to be acquired by the parent company of Burger King in a $1.8 billion deal. Wal-Mart Stores Inc (NYSE: WMT ) gained 3% after reporting better-than-expected earnings and U.S. revenues with comp-store sales ahead of estimates on an increase in customer traffic.
On the downside, Unilever plc (ADR) (NYSE: UL ) fell 7.5% after Kraft Heinz Co (NASDAQ: KHC ) withdrew its $143 billion bid for the company after a negative reaction. Sometimes, playing hard to get doesn't pay off. Separately, Verizon Communications Inc. (NYSE: VZ ) gained 0.5% after negotiating a $350 million reduction to its Yahoo! Inc. (NASDAQ: YHOO ) buyout price following an embarrassing data breach.
For now, market technicals continue to look shaky as breadth remains narrow, sentiment at extremes, and political risk extremely high. Yet there simply seems to be no stopping this uptrend.
For now, I'm suggesting participation via areas of large-cap value that have been left behind including stocks like Johnson & Johnson (NYSE: JNJ ), with the March $115 calls recommended to Edge Pro subscribers up 129% since recommended on Feb. 14.
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