US stocks edge towards record high
on 05/03/2013 07:43:24
The Dow Jones industrial average rose 38.16 points, or 0.3%, to 14,127.82. The index is a fraction of a percentage point away from its record close of 14,164, reached on October 9, 2007.
Stocks dropped at the opening bell and stayed lower most of the morning amid concern over new steps introduced by the Chinese government to cool the booming housing market in the world's second-largest economy.
Chinese markets were dragged down by housing stocks, which fell sharply after the country's cabinet ordered new measures to rein in home prices.
"The US market continues to digest the negative news and hang tough," said Ryan Detrick, a senior strategist at Schaeffer's Investment Research.
The stock market has rallied this year on optimism that the US housing market is recovering and signs that companies are hiring more. Strong corporate earnings and continuing economic stimulus from the Federal Reserve have also boosted stock prices.
Despite having already logged strong gains this year, stocks may still be able to maintain their momentum as investors move money out of bonds, Rob Lutts, chief investment officer at Cabot Money Management, said.
"It's all about where the money is going," he said. "If the money that is sitting on the sideline, or in bonds, is moving into equities that alone is enough to create that shift."
The Dow has risen 7.8% so far this year and the S&P 500 index is 6.9% higher, while the yield on the 10-year Treasury note remains below 2%. The yield, which moves inversely to its price, rose 3 basis points to 1.87% yesterday.
Janet Yellen, vice chairwoman of the Federal Reserve, said she does not see risks at the moment from the US central bank's low-interest rate policies.
The Fed is buying 85 billion dollars each month in Treasury and mortgage-backed securities to keep long-term interest rates very low.
Investors' enthusiasm is being held in check by the automatic government budget cuts that took effect on Friday after President Barack Obama and Congress failed to reach a budget deal.
Economists expect the cuts to hurt US economic growth. Both Republicans and Democrats pledged to retroactively undo the cuts, but they have given no indication of how that process would take shape.
In other trading, the Standard & Poor's 500 rose 7 points, or 0.5%, to 1,525.20. The Nasdaq composite gained 12.29 points, or 0.4%, to 3,182.03.