By Anora Mahmudova and Sara Sjolin, MarketWatch
Dow above 18,000 for the first time in 2015
NEW YORK (MarketWatch) -- U.S. stocks struggled to build on
early modest gains that sent the S&P 500 into record territory
and the Dow industrials above 18,000 for the first time this year
on Friday.
While the gains faded by afternoon, the main indexes were still
on track to finish with weekly gains for a second straight
week.
The S&P 500 (SPX) turned flat and retreated from the
intraday record level set this morning. The energy sector was still
higher, as hope that oil prices have bottomed persisted amid a
rally in the commodity. Five of the 10 main sectors were trading
higher.
The Dow Jones Industrial Average (DJI) was higher, with more
than two-thirds of its 30 components trading in the green. American
Express was leading the decliners for the second day in a row,
after its price target was cut by analysts after the credit-card
company announced the end of an important business relationship
with Costco.
The Nasdaq Composite (RIXF) rose, inching closer to its record
set in heydays of early 2000.
Randy Frederick, managing director of trading and derivatives at
the Schwab Center for Financial Research, said he was troubled to
see the record levels so soon.
"Options market is signalling some warnings signs. Namely, the
open interest in put/call ratio is at very high levels. That
indicate that either investors are very nervous or they are
positioning for a sharp pullback," Frederick said.
"The only reason the market rose to record highs is because
investors think oil is stabilizing after a few weeks of pick-up in
prices and I think that reaction was overly positive. This
development is troubling," he said.
Markets brushed off disappointing numbers from the University of
Michigan on consumer confidence earlier.
Phil Orlando, chief equity strategist at Federated Investors,
said that the disappointing reading on consumer sentiment is the
result of a pick-up in energy prices.
"It appears that consumers are not ready to believe that low
gasoline prices will last, since they have been bouncing. Poor
retail sales over the past two months, including Christmas shopping
season, confirm that. Consumers will need more time to finally
start spending," Orlando said.
Orlando said that stock still have room to move higher, despite
their already-high valuations.
"Given low interest rates and low inflation, price-to-earnings
valuations should be higher than they are right now, so we expect
the S&P 500 rise to 2,350 by the end of the year. The
fourth-quarter earnings came in better than expected, even on the
backdrop of lower consumer confidence," Orlando said.
Data: In economic news, consumer sentiment slipped in February
to a three-month low, according to media reports citing the
University of Michigan index released Friday. Separately, the
prices the U.S. paid for imported goods fell sharply again in
January mainly because of much cheaper oil, a trend that is keeping
inflation under wraps. The drop was less than expected, however,
while export prices also decreased.
Weekly Baker Hughes (BHI) rig-count number turned out to be a
non-event, as markets did not react to news. Total rotary rig count
in the U.S. fell by 98 to 1,358 as of Feb 12. Oil futures (CLH5)
were already up sharply and held their gains after the report, up
3.2% to $52.86 a barrel.
Earnings: Reporting ahead of the bell, food company J.M. Smucker
Co.(SJM) said sales slipped in the fiscal third quarter, dented by
weak volumes in the company's U.S. retail-coffee segment. Shares
dropped initially, but recovered and were 1% higher in early
trade.
Movers and shakers:Zynga Inc.(ZNGA) slumped 16% after the
games-maker said late Thursday its fourth-quarter loss widened
significantly more than expected and its revenue forecasts fell
short of expectations.
Groupon Inc.(GRPN) jumped as investors looked past the company's
weak outlook and focused on news that its Ticket Monster business
is a target for acquisition by several companies.
CBS Corp.(CBS) rose after it said late Thursday its
fourth-quarter profit fell compared with the same period a year
ago, but revenue rose.
CyberArk Software Ltd.(CYBR) rallied 15% after a solid
fourth-quarter report released late Thursday.
For more on today's notable stocks, read Movers & Shakers
column.
Other markets: European stock markets posted solid gains after
better-than-expected fourth-quarter economic-growth numbers, and as
Greece and its creditors showed signs of warming up to each other
in the deadlock over debt payments.
Asian markets closed mostly higher, with the Hong Kong market
posting its biggest gain in three weeks.
Gold prices (GCG5) rose 0.6% to $1,232.10, while the dollar
(DXY) rose against other major currencies. 10-year U.S. Treasurys
fell, sending yield up 2 basis points.
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