Published: Mon, July 11, 2016
Economy | By Melissa Porter

Stocks gain, putting S&P 500 on track for record high close

Stocks gain, putting S&P 500 on track for record high close

Stocks were set to rise again at the open Monday as the S&P 500 is likely to top its all-time high after closing Friday just one point below its record close. The Dow Jones Industrial Average added 50 points, or 0.3%, to 18,200, the S&P 500 index gained 6 points, or 0.3%, to 2,137, while the Nasdaq Composite Index added 25 points, or 0.5%, to 4,983. Oil prices fell 1.2 percent over signs that USA shale drillers have adapted to lower prices and renewed indications of economic weakness in Asia where refiners are trimming crude runs.

For the holiday-shortened week, the Nasdaq soared by 1.9 percent, while the S&P 500 and the Dow shot up by 1.3 percent and 1.1 percent, respectively.

Yields on the 10-year Treasury bond stood at 1.379%, near a record low, as yields on sovereign debt in Europe and Japan remained near-zero or in negative territory.

BONDS, CURRENCIES: Bond prices fell. That leaves stocks looking more attractive by comparison. Japan's Nikkei 225 index NIK, +3.98% closed 4% higher. "There is a lot of ugly stuff on the horizon that everyone is just sort of ignoring", said Phil Orlando, chief equity market strategist, at Federated Investors, in NY.

The gains in the USA extended Friday's momentum, when a much better-than-expected June jobs report lifted U.S. stocks by about 1.5 percent.

REVERSAL OF FORTUNE: Technology and bank stocks rose sharply on Monday, while traditional safe-play stocks like utilities and phone companies that investors have favored recently are falling. Alcoa is traditionally the first major USA company to report earnings.

As of June 30, analysts expected corporate profits to fall 5.3% in the second quarter compared with the prior year, a fifth consecutive quarter of contraction, FactSet data show. "When you look at the first five months of the year it has been an emotional roller coaster that has been beset with investor cognitive errors, most glaring of which was discounting the recession that never happened in January and February", said Julian Emanuel, equity strategist at UBS in NY. USA crude was last up 8 cents, or 0.18 percent, at $45.49 per barrel.

Sentiment was also boosted by expectations of additional economic stimulus in Japan after Prime Minister Shinzo Abe's party swept parliamentary elections. The dollar jumped 2.1% against the yen to ¥ 102.6450, according to FactSet, bolstered by Friday's report. Hong Kong's Hang Seng rose 1.5 percent.

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