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Stocks Climb Again to Record Highs as Goldilocks Reigns

Stock Market Update

Stocks eked out modest gains on Wall Street, enough to push the S&P 500 and Nasdaq indexes a bit further into record territory and more in Monday’s Stock Market Update.

Banks and communications companies did the best Monday, offsetting weakness in retailers and high-dividend companies like real estate and utilities. Bank of America rose 1.4% and Facebook added 1.7%. Simon Property Group fell 1.6%.

The Commerce Department reported the biggest gain in consumer spending last month in nearly a decade. The solid growth is not revving inflation higher, though, and the Federal Reserve’s preferred measure of price changes remains well below its target, according to Monday’s report.

Low inflation gives the central bank more leeway to hold off on raising interest rates, and it was the Fed’s pledge earlier this year to be patient on rates that sent stocks surging. The Federal Reserve will meet again on interest rates this week, and most investors expect it to make no changes.

After rocketing higher in the first few months of the year, momentum has slowed for the S&P 500 index in recent weeks. Trading has remained relatively quiet, as reports on the economy and corporate profits come in better than analysts expected.

“I think it’s healthy to see these sideways or even slightly down days,” said Nate Thooft, senior portfolio manager at Manulife Asset Management. “This is just digesting the big move we had earlier in the year.”

“We’re kind of in complacency land, Goldilocks land,” he said. “That in itself is a little bit alarming, but I don’t see what changes it either.”

Big U.S. companies continue to turn in stronger earnings reports for the first three months of the year than analysts expected. Analysts say companies across the S&P 500 index may end up reporting slightly higher profits for the first quarter than a year ago. Just a few weeks ago, Wall Street was predicting the first drop in earnings in nearly three years.

Nearly a third of the companies in the S&P 500 are scheduled to report their results for the first quarter this upcoming week, including CVS Health, General Motors and McDonald’s.

Treasury yields rose with the encouraging data on consumer spending, which helped to send financial stocks to the market’s biggest gains. High-dividend stocks fell due to the higher yields, though, which helped to keep broad indexes in check.

More relief is also coming from ongoing negotiations between the U.S. and China as they try to end a costly trade war. Both sides have said they are making progress and are continuing talks this week.

STOCK MARKET UPDATE

KEEPING SCORE: The S&P 500 index rose 3 points, or 0.1%, to 2,943. The Dow Jones Industrial Average rose 11 points, less than 0.1%, to 26,554. The Nasdaq climbed 15 points, or 0.2%, to 8,161.

Bond prices fell. The yield on the 10 year Treasury rose to 2.53%.

HEAVY INDUSTRY: Ingersoll-Rand rose 6.3% after the Wall Street Journal reported that a deal is in the works between the industrial parts maker and Gardner Denver Holdings. Both companies make pumps and compressors for industrial machinery.

CRUDE FIGHT: An oil-infused bidding war is heating up after Anadarko resurrected buyout talks with Occidental, even though it has already accepted a $33 billion bid from Chevron.

Anadarko said that it reopened talks with Occidental because its bid may be better than the one it received from Chevron. Occidental’s stock fell 1.9%.

UNDERCOOKED: Restaurant Brands International, the company behind Burger King and Tim Horton’s, fell 1.4% after its profit fell short of forecasts.

The company reported slower sales growth at its Burger King, Popeye’s and Tim Horton’s locations.

YIELD EFFECTS: The yield on the 10-year Treasury climbed to 2.53% from 2.50% late Friday.

Higher interest rates can mean bigger profits for banks making loans, and financial stocks in the S&P 500 jumped 1.2% for the largest gain in the index.

On the losing side were utility stocks and real estate investment trusts, which are big dividend payers, to the sharpest losses of the day. When bonds pay more in interest, it can dull the appeal of dividend paying stocks.

COMMODITIES: Benchmark U.S. crude rose 20 cents to settle at $63.50 per barrel. Brent crude, the international standard, fell 11 cents to $72.04 a barrel.

Natural gas added a penny to $2.59 per 1,000 cubic feet, heating oil was virtually flat at $2.05 per gallon and wholesale gasoline dipped 2 cents to $2.08 per gallon.

Gold fell $7.30 to $1,281.50 per ounce, silver lost 16 cents to $14.93 per ounce and copper was virtually flat at $2.90 per pound.

© The Associated Press. All rights reserved.

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