Specialist Peter Mazza, left, and trader Tommy Kalikas work on the floor of the New York Stock Exchange, Tuesday, Jan. 9, 2018. Stocks are opening higher on Wall Street, led by gains in health care and financial companies. (AP Photo/Richard Drew)

S&P 500 keeps climbing as calm continues to reign for stocks

January 09, 2018 - 1:14 pm

NEW YORK (AP) — Stocks around the world keep climbing in the new year, and the Standard & Poor's 500 index added to its record high as calm continues to reign over markets.

Banks and health care stocks led the way. Their gains overshadowed weakness in telecoms and other dividend-paying stocks, which fell as bond yields rose.

KEEPING SCORE: The S&P 500 rose 8 points, or 0.3 percent, to 2,756 as of 1 p.m. Eastern time. If the index ends the day higher, it would match the longest winning streak to start a year since 2010, at six days.

The Dow Jones industrial average rose 123 points, or 0.5 percent, to 25,406, the Nasdaq composite rose 16 points, or 0.2 percent, to 7,174 and the Russell 2000 index of small-cap stocks gained 2, or 0.2 percent, to 1,564.

HEALTHY GAINS: Health care stocks rose 0.9 percent for one of the biggest gains among the 11 sectors that make up the S&P 500. They more than made up their losses from the prior day.

Illumina was at the front of the pack after it reported preliminary results for fourth-quarter revenue, which easily topped analysts' expectations. Shares of the company, which makes tools for genetic analysis, jumped $17.64, or 7.8 percent, to $244.70.

Boston Scientific likewise gave preliminary results for its revenue last quarter, which were stronger than Wall Street was expecting. The medical device company's shares rose $1.57, or 6.1 percent, to $27.38.

FOLLOWING THE MOMENTUM: Stocks have been steadily rising for more than a year as investors bask in an economy where countries around the world are finally growing in sync. Corporate profits are also on the upswing, and the recently passed tax cut should goose earnings even higher.

The powerful combination has not only pushed stocks higher, it's also kept the market remarkably calm with hardly any sharp drops. It's also raised optimism on Wall Street, even though professional investors acknowledge that the market has grown more expensive than usual, relative to corporate profits.

"I would like to say that there's something onerous coming, just because it would be different from what everyone is talking about," said Nate Thooft, senior portfolio manager at Manulife Asset Management. But Thooft says he expects to see the market continuing to glide higher.

When a drop does come, Thooft said he sees it as being shallow and short-lived, like past ones have been. Anyone who has followed the strategy to "buy the dips" has been rewarded, as stocks have gone on to recover from every wobble. "Time and time again, they've been buying opportunities, and I don't see what's changed here."

UPCOMING EARNINGS SEASON: Companies are set to begin reporting their results for the last three months of 2017, and the pace will pick up later this week.

Investors, though, are more interested about what CEOs will say about Washington's overhaul of the tax system last month will do to their bottom lines.

Strategists at Goldman Sachs say the tax changes will account for more than a third of the expected 14 percent growth they're forecasting for S&P 500 earnings per share in 2018.

SEASON'S GREETINGS: Target became the latest retailer to say it enjoyed a strong holiday season, and it raised its profit forecast for the year. The company also credited lower tax rates for the brighter outlook.

Target rose $2.44, or 3.6 percent, to $69.62.

DIVIDENDS DULLED: Telecoms, utilities and real-estate stocks lagged well behind the market. They offer some of the market's biggest dividend yields, which means their stocks often move in the opposite direction of bond yields.

The yield on the 10-year Treasury note rose to 2.53 percent from 2.48 percent late Monday and reached its highest level since March. That raises bonds' appeal relative to dividend-paying stocks for investors seeking income.

Utility stocks in the S&P 500 fell 1 percent, the worst performance in the index. Telecoms and real-estate stocks lost 0.8 percent.

FINE FINANCIALS: On the opposite end, rising interest rates help banks because they can lead to bigger profits from making loans. Financial stocks in the S&P 500 climbed 1.1 percent.

MARKETS ABROAD: Japan's Nikkei 225 added 0.6 percent, Hong Kong's Hang Seng rose 0.4 percent and the Shanghai Composite inched up 0.1 percent. South Korea's Kospi lost 0.1 percent.

The CAC 40 in France rose 0.7 percent, the DAX in Germany rose 0.1 percent and the FTSE 100 in London gained 0.4 percent.

CURRENCIES: The dollar fell to 112.59 Japanese yen from 113.07 yen late Monday. The euro fell to $1.1922 from $1.1965, and the British pound dipped to $1.3527 from $1.3564.

COMMODITIES: Benchmark U.S. crude oil rose $1.08 to $62.81 per barrel. Brent crude, the international standard, rose 85 cents to $68.63 per barrel.

Gold fell $8.00 to $1,312.40 per ounce.

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