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Dow edges toward record high

Feb 13 2013 07:36 AP


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New York - The Dow edged closer to a record on Tuesday as stocks advanced following strong earnings from Avon and Michael Kors.

The Dow Jones industrial average was up 50 points at 14,022 with less than an hour of trading left, putting it within 1% of the record close of 14,164 it set in October 2007. The Dow surged at the start of the year, logging its best January in almost two decades.

Stocks are building on a rally that began in January after lawmakers reached a last-minute deal to avoid the "fiscal cliff" of sweeping tax increases and spending cuts. Investors are also becoming more optimistic that the housing market is recovering and that hiring is picking up.

Avon, a direct seller of beauty products, jumped $3.61, to $20.89 Tuesday after the company posted a fourth-quarter loss that wasn't as bad as analysts had expected. The company also hopes to save $400m by slashing costs. Michael Kors, a luxury clothing and accessories seller, rose $4.28, to $61.34 after reporting earnings that beat analysts' predictions.

The Standard & Poor's 500 gained three points to 1,520 and is also close to its record level. The Nasdaq composite was down three points at 3,188.

About 70% of companies in the S&P 500 have reported earnings for the fourth quarter. Analysts are projecting that earnings will rise 6.4% for the period, an improvement from the 2.4% growth reported in the third quarter, according to S&P Capital IQ.

The Dow has advanced 7% this year and the S&P 500 is up 6.6%.

Investors may have become too optimistic about the outlook for stocks, said Uri Landesman, president of hedge fund Platinum Partners.

"The market is priced for perfection," said Landesman. "The odds of a disappointment are very, very high."

Landesman predicts that the S&P 500 will climb past its record and rise as high as 1,600 by April before then slumping as low as 1,300 as company earnings start to disappoint investors. The record close for the S&P 500 is 1,565, reached in October 2007.

Investors appear to be supporting the market by stepping in to buy stocks when prices dip, said JJ Kinahan, chief derivatives strategist at TDAmeritrade. The S&P 500 has gained for six straight weeks since the start of the year.

Confidence in the outlook for global growth has strengthened among asset managers in recent months, according to a Bank of America Merrill Lynch survey. The poll found that 59% of investors believe that the global economy will strengthen in the year ahead, in line with the reading in January. The outlook for growth had improved in the four previous months.

Investors will be watching closely Tuesday night when President Barack Obama delivers his annual State of the Union speech. Obama is expected to focus on the economy, including job creation.

A decline in bond prices since the beginning of the year has also slowed. The yield on the 10-year Treasury note, which moves inversely to its price, rose 2 basis points to 1.98%. The yield was 1.71% at the beginning of the year.

Among other stocks making big moves:

  • Coca-Cola, the world's largest beverage company, fell $1.28 to $37.34 after reporting fourth-quarter revenue that fell short of analysts' forecasts.
  • Masco jumped $2.08, to $19.86 after the home improvement and building products company reported earnings that beat analysts' expectations thanks to strong demand in North America.
  • Dun & Bradstreet, a provider of credit and business data, fell $6.48, to $78.79 after the company reported that a fourth-quarter profit that came in below market expectations.

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