Dow holds on to 15,000 with modest gain
NEW YORK — The Dow Jones industrial average rose, closing above 15,000 for a second day after breaching the landmark level for the first time on Tuesday.
On Wednesday, a day without any major economic releases, investors focused on company earnings as reporting for the first quarter draws to a close. Although earnings growth has slowed from last quarter, profits are at record levels and are projected to rise throughout the year.
Internet company AOL plunged as its subscription revenue fell, and hamburger chain Wendy's slumped after it reported revenue that fell short of Wall Street's expectations. On the positive side, high-end grocer Whole Foods Market and the video game publisher Electronic Arts rose sharply after predicting full-year profits that were higher than analysts were expecting.
Scott Wren, a senior equity strategist at Wells Fargo Advisors, predicted more gains in the short term, but he said a pullback was likely at some point because the rise in the market is beginning to overstate the improvement in the economy.
“We're still going to keep grinding higher,” Wren said. “I do think the market is ahead of itself.”
Stocks have defied predictions that a sell-off would follow the spring surge as signs emerged that growth could be set for a slowdown. Both the Dow and the Standard & Poor's 500 index have gained every month of the year and are trading at record highs.
On Wednesday, AOL fell $3.68, or 8.9 percent, to $37.74 after the company reported earnings that fell short of the forecasts of Wall Street analysts who follow the stock. Subscription revenue fell 9 percent.
Wendy's fell 34 cents, or 5.6 percent, to $5.78 after it reported a 2 percent rise in revenue to $603.7 million, short of the $615 million forecast of analysts.
Materials and information technology companies gained the most of the 10 industry groups in the S&P 500 index, rising 0.9 percent and 0.8 percent, respectively. The two industry groups have surged in the past month and are finding favor with investors after lagging the index for the first three months of the year.
That suggests that investors are moving from the so-called defensive stocks — those that offer good dividends and can grow regardless of the state of the economy — into industries that will benefit more if the economy accelerates.
Gains for the year so far have been led by health care stocks, which have advanced 19 percent, compared with 8 percent for technology companies.
“We're seeing some sector rotation,” said Chris Bertelsen, the chief investment officer of Global Financial Private Capital. Defensive stocks “have had a huge run this year. ... I think you are seeing some change of attitude in the market.”