Major U.S. indexes rose to all-time highs for the second day in a
row Thursday, but the gains were driven by stocks that investors
tend to buy when they want to avoid risk, such as power companies,
banks and drugmakers.
The flight to less-volatile stocks and those that pay
bigger-than-average dividends suggested that investors are becoming
more cautious after a 26 percent surge in the market this year. More
investors are saying the market has risen too far, too fast given
the sluggish state of the U.S. economy.
"The legion of people in the last three months who think this market
has topped out has grown significantly," said JJ Kinahan, chief
strategist at TD Ameritrade. However, Kinahan said the general
tendency for the market is still to move higher.
Across the market, the most popular names were "defensive" stocks,
ones that are seen as more likely to hold up in a downturn.
Northeast Utilities, New England's largest utility, rose 2 percent.
Oil refining company Valero Energy rose 4 percent and life insurance
company MetLife increased 3 percent.
The Dow Jones utility index, which is made up of 15 large utility
companies, rose 1 percent, double the gain in the broader market. On
the flip side, small-company stocks, which are viewed as more risky
than larger, more established companies, were the only major
category of stocks to fall. The Russell 2000 index edged lower.
The Dow Jones industrial average gained 54.59 points, or 0.4
percent, to 15,876.22, while the Standard & Poor's 500 index added
8.62 points, or 0.5 percent, to 1,790.62. Both were record highs.
The Nasdaq composite edged up 7.16 points, or 0.2 percent, to
3,972.74.
Network equipment maker Cisco Systems plunged after predicting a
slump in sales, pulling other large technology companies down. Cisco
sank $2.63, or 11 percent, to $21.36, Hewlett-Packard lost $1.42, or
5 percent, to $25.07 and Oracle fell 62 cents, or 2 percent, to
$34.38.
Cisco, which relies heavily on government contracts, said its
revenue for the current quarter could fall as much as 10 percent
from the same period a year ago. The company's chief executive, John
Chambers, blamed budget gridlock in Washington, which resulted in a
partial shutdown of the federal government for 16 days and a
near-breach of the nation's borrowing limit.
[to top of second column] |
"The shutdown, debt ceiling negotiations and delay of key decisions
exasperated the lack of confidence among business leaders," Chambers
said in a conference call with analysts.
Investors pay close attention to what Cisco says because it's
considered a proxy for business spending on technology. Cisco
manufactures equipment that makes up the backbone of the Internet
such as routers and servers.
At least one investor felt that Wall Street was overreacting to
Cisco's results.
"Everything seemed hunky-dory in tech and then Cisco comes out and
says this ... it stands out to me as a little bit of anomaly," said
Daniel Morgan, a portfolio manager at Synovus Trust Company, who
focuses mostly on technology investments. "It's a concern, but I
don't think this is a reason to rethink my whole strategy," he said.
Cisco is still up 21 percent over the past year.
The market was also helped by news out of Washington, D.C.
Janet Yellen, who has been nominated to replace Ben Bernanke as the
lead of the Federal Reserve, made no indication she would deviate
from the economic stimulus policies that Bernanke has championed.
The comments came during her testimony in front of the Senate
Banking Committee.
When asked her opinion about the recent rally in stock prices,
Yellen said stocks "are not in bubble territory."
[Associated
Press; KEN SWEET, AP Markets Writer]
AP Technology Writer
Barbara Ortutay contributed to this report.
Contact Ken Sweet at
http://twitter.com/kensweet.
Copyright 2013 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |