US stock end with slim gains

US stocks ended with slim gains Tuesday in choppy trade as strong underlying momentum limited profit taking and kept Wall Street’s sizzling summer rally on track. The modest rise kept a three-week uptrend intact and pushed the main indexes to fresh 2009 highs.

The Dow Jones Industrial Average rose 33.63 points (0.36 percent) to end at 9,320.10, rebounding late in the day after spending most of the session in the red. The Nasdaq composite added 2.70 points (0.13 percent) to 2,011.31 after closing Monday above 2,000 for the first time since last October.

The broad-market Standard & Poor’s 500 managed a gain of 3.02 points (0.30 per cent) to 1,005.65 after topping 1,000 on Monday for the first time since November 4. Analysts said traders were digesting gains from a strong three-week surge, looking past the day’s economic and corporate news, but that many investors were still looking to get in on the rally.

“While it appears that the US stock market is extended, global money appears to be moving from US Treasuries into equities, thus benefitting the US stock market,” said Fred Dickson at DA Davidson & Co.

“We suspect some of the interest in domestic equities is spilling over from global investors with lots of cash who are also looking for catch-up plays beyond the Asian markets which have seen large gains since early March. The US market, although up 45 per cent since March, qualifies as a laggard compared to China and other smaller emerging markets.

” Ted Wieseman, economist at Morgan Stanley, said confidence is growing that the economy is emerging from recession, possibly led by the auto sector that seems to be revving up sales and production from the “cash for clunkers” government incentives.

“Confidence continues to build that this worst recession since the Great Depression is ending and could be ending with a bang, if probably only a temporary one, with a major reversal in the auto sector apparently unfolding that could provide substantial upside to third-quarter GDP,” or gross domestic product, Wiesman said.

In data released during the day, the Commerce Department said US consumer spending rose for the second consecutive month, by 0.4 per cent, slightly better than the average consensus forecast for a 0.3 per cent increase. Personal incomes slipped 1.3 percent in June, wiping out the revised 1.3 per cent gain in May, the data showed.

This volatility reflected the timing of payments from the government’s 787-billion-dollar economic stimulus, “which boosted personal current transfer receipts in May much more than in June.” Excluding the stimulus provisions, the decrease in incomes was 0.1 per cent.

Ian Shepherdson at High Frequency Economics said there were “no green shoots at all in these data” and suggested consumer spending, the key driver of economic activity, remains sluggish. A separate report from the National Association of Realtors showed pending home sales, a forward-looking indicator based on contracts signed in June, rose 3.6 per cent.

The report “confirms the gradual improvement in the housing market,” said Alexander Miron at Moody’s Economy.com. Among stocks in focus, PepsiCo climbed 5.09 percent to 59.06 as the maker of Pepsi soft drinks said it had reached a deal to acquire its two key bottlers, Pepsi Bottling Group and PepsiAmericas, for 7.8 billion dollars.

PBG lifted 8.54 per cent to 36.49 and PepsiAmericas rallied 8.99 percent to 28.50 dollars. Archer Daniels Midland slumped 5.2 percent to 28.81 dollars as the agribusiness giant disappointed the market with an 83 percent drop in quarterly profit amid falling demand for oilseeds and ethanol.

Heavy equipment maker Caterpillar, a company sensitive to economic cycles, rallied 6.14 percent to 47.89 dollars after its executives offered upbeat comments to an investor conference. Bonds slipped. The yield on the 10-year US Treasury bond rose to 3.679 per cent from 3.639 per cent Monday and that on the 30-year bond increased to 4.464 per cent from 4.422 per cent. Bond yields and prices move in opposite directions. - AFP