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Stocks edge higher; Avon, Michael Kors surge
Question of the Day
NEW YORK (AP) — Stocks moved higher on Tuesday, with the Dow Jones industrial average edging closer to a record, following strong earnings from Avon and Michael Kors.
The Dow was up 63 points to 14,034 at 1:57 p.m. EST, the highest level for the index since October 2007. The index is now 130 points shy of its record close set in October 2007.
The Standard & Poor’s 500 gained four points to 1,521 and is also close to its record level. The Nasdaq composite was up one point at 3,193.
Avon, a direct seller of beauty products, jumped $3.57, or 21 percent, to $20.86 after the company posted a fourth-quarter loss that wasn’t as bad as analysts had expected. The company also hopes to save $400 million by slashing costs.
Michael Kors, a luxury clothing and accessories seller, rose $5.42, or 10 percent, to $62.41 after reporting earnings that beat analysts’ predictions.
Coca-Cola, the world’s largest beverage company, fell $1.02 to $37.59 after reporting fourth-quarter revenue that fell short of analysts’ forecasts.
About 70 percent of companies in the S&P 500 have reported earnings for the fourth quarter. Analysts are projecting that earnings will rise 6.4 percent for the period, an improvement from the 2.4 percent growth reported in the third quarter, according to S&P Capital IQ.
A start-of-the-year rally that pushed indexes close to record highs has slowed down. The S&P 500 is up 1.5 percent this month, following a 5 percent gain in January. The Dow has advanced 1.3 percent in February after surging 5.8 percent a month earlier, logging its best January in almost two decades.
Investors may have become too optimistic about the outlook for stocks, said Uri Landesman, president of hedge fund Platinum Partners.
“The market is priced for perfection,” Mr. Landesman said. “The odds of a disappointment are very, very high.”
Mr. Landesman predicts that the S&P 500 will climb past its record and rise as high as 1,600 by April before then slumping as low as 1,300 as company earnings start to disappoint investors. The record close for the S&P 500 is 1,565, reached in October 2007.
Stock advanced at the start of the year after lawmakers reached a last-minute deal to avoid the “fiscal cliff” of sweeping tax increases and spending cuts. Investors are also becoming more optimistic that the housing market is recovering and that hiring is picking up.
Investors will be watching closely Tuesday night when President Obama delivers his annual State of the Union speech. Obama is expected to focus on the economy, including job creation.
Investors appear to be supporting the market by stepping in to buy stocks when prices dip, said JJ Kinahan, chief derivatives strategist at TDAmeritrade. The S&P 500 has gained for six straight weeks since the start of the year.
Confidence in the outlook for global growth has strengthened among asset managers in recent months, according to a Bank of America Merrill Lynch survey. The poll found that 59 percent of investors believe that the global economy will strengthen in the year ahead, in line with the reading in January. The outlook for growth had improved in the four previous months.
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