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U.S. stocks edge higher; Russell 2000 rallies

U.S. stocks edge higher; Russell 2000 rallies

Jobless claims jump to 326,000; Nasdaq Biotechnology index gains 2.7%

By Anora Mahmudova, MarketWatch May 22, 2014

NEW YORK (MarketWatch) — After an initial wobble, U.S. stocks rose on Thursday, with high-growth and small-cap companies leading gains.

Analysts noted that while markets are inching higher, the disconnect between low bond yields and divergence between small-caps and large-caps is a concern for investors.

The S&P 500 SPX +0.39% was 6 points, or 0.3%, higher at 1,894.11, with utilities and health care sector stocks leading the gains. The Dow Jones Industrial Average DJIA +0.15% added 17 points, or 0.1%, to 16,550.41. The
Nasdaq Composite COMP +0.67% gained 24 points, or 0.6%, to 4,154.91, with biotech companies leading gains. The Nasdaq Biotechnology index was up 2.6%.

Keith Springer, president of Springer Financial Advisors, says that Thursday gains are a continuation of the Fed minutes reaction.

“The stock market should have rallied stronger yesterday when the Fed minutes revealed that Fed is not going to take away the punch bowl any time soon,” Springer said.

“But the larger issue is that the bond market — where the 10-year yield is at 2.5%, is most likely correct to think the economy is weakening. Therefore we expect a 10%-15% correction in the stock market this summer,” he added.

Jim Russell, senior equity strategist at U.S. Bank Wealth Management, says softer economic data are beginning to concern investors.

“If the economy continues to grow very tepidly by the end of the year, when the Fed has exhausted its bond-buying stimulus program, what other tools will they have to ramp up growth? That question is worrying investors more than when the rate hikes will come,” Russell said.

Ahead of the market open, stock futures got a lift from strong manufacturing data out of China and Japan, however, gains quickly dissipated. By afternoon, investors shrugged off weaker-than-expected report on unemployment benefits.

New applications for unemployment benefits rose sharply in mid-May, reversing a big drop earlier in the month that put initial claims at a seven-year low.

Sales of existing homes rose 1.3% in April to a seasonally adjusted annual rate of 4.65 million, the National Association of Realtors reported Thursday, mostly in line with expectations.

The leading economic index for the U.S. ticked up in April to 101.4, the Conference Board said Thursday, while manufacturing picked up to a 3-month high in May, according to the flash purchasing managers index released by Markit on Thursday.

Keith Springer on MarketWatchIn earnings news, Best Buy BBY +1.46% shares gave up earlier gains and was up 1% after the retailer’s adjusted first-quarter profit beat expectations.


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