The Dow Jones industrial average broke through 18,000 points for the first time Tuesday as the stock market continued a late-year march to record highs.
Investors welcomed the latest encouraging news on the economy as the government said the U.S. grew at the fastest pace in more than a decade in the third quarter. The market is heading for its fifth straight gain as indexes recover the last of the ground they lost in an early-December slump.
KEEPING SCORE: The Dow Jones industrial average rose 96 points, or 0.5 percent, to 18,056 as of 1:06 p.m. Eastern time. The Standard & Poor’s 500 gained five points, or 0.3 percent, to 2,084. The Nasdaq composite fell 13 points, or 0.3 percent, to 4,768.
STRONG FINISH: The market has bounced back after a rough patch earlier this month. The latest rally comes as investors have been encouraged by signs of strength in the U.S. economy and reassurances that the Federal Reserve won’t interest rates soon. Those trends bode well for the bull market run, which is on track to mark its sixth year in March. Despite weak growth overseas, geopolitical troubles and other concerns, investors have repeatedly bet on the U.S. economy and corporate earnings growth this year, pushing stock prices higher.
MILESTONE CRUSHERS: The all-time highs set by the Dow and S&P 500 Monday and Tuesday are the latest in a long string of records. Through Monday, the S&P 500 had set 50 record closes this year, while the Dow has set 35, according to S&P Dow Jones Indices. If the Dow closes above 18,000, it would be its second 1,000-point milestone this year after closing above 17,000 for the first time in July. All told, the S&P 500 is up 12.7 percent this year, while the Dow has gained 8.9 percent. The Dow, which has just 30 stocks, has been held back by a slump in Chevron as the price of oil collapsed and by an 11 percent drop in IBM.
THE QUOTE: Despite being at record highs, stocks are not overvalued, said Cameron Hinds, regional chief investment officer at Wells Fargo Private Bank.
“You have to understand that U.S. economic output is at an all-time high and corporate profits are at an all-time high,” Hinds said. “Bull markets typically don’t die purely of old age, they tend to die of recessions and overvaluation and perhaps policy mistakes, and we don’t see any of those on the horizon.”
GROWTH SPURT: The Commerce Department reported that the economy grew at a 5 percent annual rate in the July-September period, powered by stronger consumer spending and business investment. That’s the fastest quarterly growth since the summer of 2003.
ECONOMIC BAROMETERS: Investors were monitoring a mixed bag of economic reports Tuesday. Consumer spending grew at the fastest pace in three months in November, while income posted the best gain in five months. Factory orders for long-lasting manufactured goods declined last month. And sales of new homes slid 1.6 percent in November to a seasonally adjusted annual rate of 438,000, the second consecutive monthly decline.
BIOTECH SLUMP: Express Scripts, the nation’s largest pharmacy benefits manager, is putting pressure on drugmakers like Gilead Sciences and others to lower prices. That sent the sector lower on Tuesday, weighing down the Nasdaq. Gilead shed $4.33, or 4.7 percent, to $88.55. Other big decliners were Regeneron Pharmaceuticals, which shed $24.85, or 6 percent, to $388.29, and Celgene, which slid $8.95, or 7.9 percent, to $104.55. Biogen also tumbled, falling $23.20, or 6.6 percent, to $329.30. Express Scripts rose $2.63, or 3.2 percent, to $84.97.
SECTOR VIEW: Nine of the 10 sectors in the S&P 500 rose, with materials and energy stocks leading the pack. Chesapeake Energy notched the biggest gain among stocks in the S&P 500, adding $1.51, or 8.2 percent, to $19.93.
GOOD MEDICINE: Shares in Walgreen rose after the drug store chain reported better-than-expected fiscal first-quarter earnings. The stock added $2.16, or 2.9 percent, to $76.43.
HOLIDAY SEASON: Trading volume is expected to thin out the next couple of days as the market shifts into Christmas holiday mode. On Wednesday, U.S. and European markets close early.
OVERSEAS ACTION: In Europe, France’s CAC-40 added 1.4 percent and Germany’s DAX rose 0.6 percent. Britain’s FTSE rose 0.3 percent. In Asia, the Shanghai Composite Index closed down 3 percent, while Hong Kong’s Hang Seng shed 0.3 percent and Seoul’s Kospi lost 0.2 percent. India’s Sensex declined 0.6 percent.
ENERGY: Oil prices stabilized after a recent rout. Benchmark U.S. crude rose $1.15 to $56.41 per barrel. The price has fallen by about half from a peak of $107 a barrel in June due to abundant supplies and waning global demand for energy.
BONDS: U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 2.21 percent.