Less-volatile stocks key in record day
NEW YORK — Not all record days on the stock market are created equal.
Major indexes rose to highs for the second day in a row on 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 drug makers.
The flight to “defensive” stocks and those that pay bigger-than-average dividends suggested that investors are becoming more cautious upon 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 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 viewed 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 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 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.
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.
The market was helped by news out of Washington.
Janet Yellen, who has been nominated to replace Ben Bernanke to lead the Federal Reserve, made no indication she would deviate from the economic stimulus policies that Bernanke has enacted. She made the comments during her testimony to the Senate Banking Committee.