While you were sleeping Fresh records for Dow, S and P

Tuesday 26th November 2013

Wall Street continued its climb towards fresh records before retracing part of those gains in the afternoon session as some investors appeared to suffer from vertigo.

In afternoon trading in New York, the Dow Jones Industrial Average rose 0.16 percent, while the Standard & Poor's 500 Index gained 0.05 percent, and the Nasdaq Composite Index increased 0.18 percent.

Gains in shares of Caterpillar and Goldman Sachs, last up 2 percent and 1.3 percent respectively, outweighed declines in Boeing, down 2.2 percent, and IBM, 1.4 percent weaker, to help lift the Dow.

Earlier in the session, the Dow climbed to a record 16,108.34, while the S&P 500 rallied to an all-time high of 1,806.33. So far in 2013, the Dow has risen 26 percent, while the S&P 500 has added 29 percent.

Those gains are justified, according to Jonathan Golub, chief US market strategist at RBC Capital Markets in New York.

"Not surprisingly, many investors are asking whether this sets us up for some type of pullback. In our view, the answer is a resounding 'No.' While these results are excellent, especially in the context of weak economic and earnings growth, they are hardly out of the ordinary," Golub told Reuters. "Since 1965, the S&P 500's forward price-earnings ratio has averaged 14.1 times. The market multiple currently sits at 15 times, hardly out of the norm."

Before the year is up, the Federal Reserve will certainly impact the direction with its take on the state of the US economy in its next two-day policy meeting starting December 17.

Released last week, minutes of the previous US Federal Open Market Committee meeting showed that policy makers might begin easing the pace of their bond-buying program as soon as next month.

Even so, four out of five investors expect the Fed to delay a taper decision until March 2014 or later, according to a Bloomberg survey. Just 5 percent are looking for a move at the December meeting, the November 19 poll showed.

Meanwhile, the recent rise in borrowing costs appears to have impacted home sales. The Pending Home Sales Index fell 0.6 percent to 102.1 in October, sliding for the fifth straight month to the lowest level since December, according to the National Association of Realtors.

"The data suggest sluggish home sales going into the end of the year and that the tightening of financial conditions this summer did have a negative impact," Yelena Shulyatyeva, an economist at BNP Paribas in New York, told Reuters.

In Europe, the Stoxx 600 Index finished the day with a gain of 0.4 percent from the previous close. The UK's FTSE 100 Index rose 0.3 percent, while France's CAC 40 gained 0.6 percent.

Germany's DAX advanced 0.9 percent to close at 9,299.95, after reaching a record high of 9,323.44 earlier in the session.

Helping to underpin equity markets, while depressing oil prices, was a short-term agreement between Iran and world's top powers on the country's nuclear program.

Brent dropped as much as 2.7 percent, while West Texas Intermediate fell as much as 1.9 percent, according to Bloomberg.

BusinessDesk.co.nz

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