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Dow Caps Longest Advance Since June as Hewlett-Packard Climbs

Wednesday, 08 August 2012 05:03 PM

The Dow Jones Industrial Average rose a fourth day, the longest gain since June, as a jump in Hewlett-Packard Co. helped the measure recover from earlier losses.

The Standard & Poor’s 500 Index advanced 0.1 percent to 1,402.21 at 4 p.m. New York time. The Dow Jones Industrial Average added 7.04 points, or 0.1 percent, to 13,175.64.

“People have been particularly surprised with earnings,” said David Goerz, the San Francisco-based chief investment officer at Highmark Capital Management Inc., which oversees about $17.5 billion of assets. “Profit margins are still very high and will not fall off a cliff. There’s a tendency for people to be more inclined to be a buyer than a seller.”

A four-day rally has taken the S&P 500 up almost 10 percent from a five-month low on June 1. The index is trading above the average year-end forecast among Wall Street strategists of 1,389. About 73 percent of S&P 500 companies which reported second-quarter results so far have beaten analysts’ earnings estimates, Bloomberg data showed.

Earlier, benchmark gauges fell after Federal Reserve Bank of Dallas President Richard Fisher said adequate economic stimulus already is in place and that global central banks may not have the capacity to undertake additional measures to boost growth. Stocks rose Tuesday as Fed Bank of Boston President Eric Rosengren said the central bank should pursue an “open- ended” easing program of “substantial magnitude.”

‘Can’t Hurt’

“Stimulus can’t hurt, but the problem is that it has less and less effect,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati. “Any argument by policymakers is going to pull the market in various directions, depending on what they are saying.”

The S&P 500 is in a “make-or-break situation” that will probably lead to either large gains or losses for the benchmark U.S. stocks gauge, according to technical analysts at UBS AG.

After climbing through the 1,390 level, the S&P 500 may go on to test the highs reached in March and May, Michael Riesner and Marc Mueller in Zurich wrote in a report dated Tuesday. A drop below 1,325 would indicate a retreat to the early-June low of 1,266. That would be a 9.7 percent slide from Tuesday’s close of 1,401.35.

Investors should watch the flow of money into so-called defensive stocks, whose earnings are less dependent on economic growth, and cyclicals, which are more tied to the performance of the economy, for signs of future moves in the S&P 500, the analysts said.

“The U.S. market remains in a classic make-or-break situation, where a breakout and a subsequent trend move shouldn’t be too far away,” they wrote. “Either the market is able to start a new momentum impulse -- and for this we would need to see a rotation on the sector basis, from defensives into financials or cyclicals -- or the S&P 500 will very soon get a breadth problem, when defensives are starting to pull back.”

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Wednesday, 08 August 2012 05:03 PM
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