Investors nudged the US stock market to all-time highs yesterday despite a handful of disappointing economic reports.
Google’s stock topped 900 dollars for the first time after the company announced several upgrades to its Android software for smartphones, and Macy’s rose after beating Wall Street’s profit estimates. Apple fell, holding back the Nasdaq composite index.
The market got off to a weak start, then turned higher in late morning trading. Investors shrugged off a slowdown in manufacturing last month. More signs of slack in the US economy, the thinking goes, means the Federal Reserve will keep pumping money into financial markets.
Terry Sandven, chief equity strategist at US Bank’s wealth management group, said most investors have come to expect choppy economic growth, so they take mildly disappointing reports in stride. With companies reporting rising earnings and few appealing alternatives, he sees no reason to sell stocks.
“It’s a good backdrop for the market to trend higher,” Mr Sandven said.
The Dow Jones industrial average rose 60.44 points to close at 15,275.69, an increase of 0.4%.
The Standard & Poor’s 500 index gained 8.44 points to 1,658.78, up 0.4%. Both closed at all-time highs.
Google gained 3% as the online search company unveiled a music streaming service and upgraded features for Google Maps. Google rose 28.79 dollars to 915.89 dollars, a gain of 3%. It is up 50% over the past year.
News of slowing manufacturing in the US and a widespread slowdown in Europe weighed on financial markets in early trading. The Federal Reserve said that US factories cut back sharply on production in April, as automakers produced fewer cars and most other industries scaled back. But the stock market recovered by midday.
“Yes, we’re at all-time highs, but valuations are still attractive,” Mr Sandven said. The S&P 500 is trading at 15 times earnings for 2013, in line with the historical average of the closely watched price-to-earnings ratio.
Tepid economic growth also keeps interest rates low, which encourages investors to buy dividend-paying stocks instead. More than four out of every 10 companies in the S&P 500 pay a higher yield in dividends than US government bonds pay in interest, according to Mr Sandven.
In other trading, the Nasdaq composite rose 9.01 points to 3,471.62, a gain of 0.2%.Apple’s stock took a sudden turn lower after reports said that a hedge fund run by the billionaire David Tepper slashed its holdings in the tech company.