Wall Street closed mixed on Tuesday, with technology the bright spot, as blue chips and the S&P 500 index failed to sustain record breaking momentum.
Without fresh economic data, investors focused on deals news, with shares in MGM Mirage surging 27.1 per cent to $79.98. Kirk Kerkorian said Tracinda, his investment company, was negotiating with MGM about buying the casino operator’s Bellagio Hotel and City-Center properties in Las Vegas. Mr Kerkorian holds a 56 per cent stake in MGM.
The S&P 500 made another foray above its record close of 1,527.46 set on March 24, 2000 on Tuesday, but could not hold gains. The S&P reached an intra-day high of 1,529.24, a shade under Monday’s intraday high of 1,529.87.
The US benchmark again struggled to make the decisive move higher that would eclipse the all-time intraday high of 1,552.87 – set on the same day as the all-time closing high seven years ago. Late in New York, the S&P had closed 0.1 per cent lower at 1,522.11. Technology and financials were the only two positive sectors among the 10 major industry groups in the index. Materials and energy stocks led losses.
The Nasdaq Composite closed 0.4 per cent higher at 2,588.02, and had reversed weakness earlier in the day as semiconductor stocks rebounded.
Blue chips set an new intra-day record high, but failed to hold that rally. The Dow Jones Industrial Average fell 0.02 per cent lower to close at 13,539.95 after it had set a new record high of 13,586.68.
The S&P’s flirtation with record levels comes after more than 90 per cent of companies in the index have reported first-quarter results.
“Although US growth has been slowing, S&P 500 margins seem to have been maintained in part thanks to the strength of the global economy and a weakening dollar which have boosted overseas sales. Around 30 per cent of revenues now come from abroad,” said David Shairp, global strategist at JPMorgan Asset Management.
“While earnings growth may continue to decelerate, we are not likely to see outright falls as long as the US does not go into recession and growth elsewhere stays robust.”
Although recent economic data have been inconsistent, the stock market is riding a wave of liquidity, say analysts. “There is an ample supply of inexpensive investment capital and real interest rates remain low,” said Doug Peta, equity strategist at J&W Seligman.
As stock prices have rallied since the end of March, short sales of shares have risen sharply – indicating that some investors expect the market to suffer a reversal.
A short sale is a sale of a security that the seller does not own, and makes money if prices fall.
Late on Monday, the New York Stock Exchange said the number of shares that have been sold short, known as short interest, increased to 11.8bn as of May 10, a new record high, from 11.0bn on April 13.
Analysts at Bespoke Investment Group said the 7 per cent rise in short interest over the past month was the 10th largest monthly increase in short interest over the last 16 years. They concluded: “It is hard to imagine that investors are overly bullish with short interest hitting record highs month after month.”
Amid the MGM casino news, other gaming stocks rose on Tuesday, led by Boyd Gaming, up 5.5 per cent to $49.64, Wynn Resorts, up 7.4 per cent to $101.15 and Las Vegas Sands higher by 5.6 per cent at $80.19.
On the back of Fremont General’s sale of its commercial real estate business to iStar, other mortgage lenders rallied, with shares in Accredited Home Lenders rising 4.9 per cent to $13.38. Shares in iStar rallied 3.9 per cent to $47.60.
In company news, Chevron said it planned to sell its 12 per cent stake in power producer Dynegy, the power producer, in a move to exit non-core operations. Shares in Dynegy fell 3.3 per cent to $9.83, while Chevron was 0.8 per cent lower at $82.18.
In earnings news, Staples said its first-quarter profit rose 12 per cent, but lowered its guidance for future earnings. Shares in the office products supplier had slid 2.4 per cent to close at $25.05.
A brokerage upgrade boosted Citrix Systems, by 5.4 per cent to $32.91. The software maker set a recent high of $34.63 in late April.
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