U.S. stocks pulled back from session highs Tuesday, putting fresh records for the Dow and S&P 500 at risk as an early rally in financial and energy stocks cooled, leaving the heavy lifting to technology stocks.
The Dow Jones Industrial Average YMU7, +0.03% following a brief dip into negative territory, rose 9 points, or less than 0.1%, to 22,127. Apple Inc. AAPL, +1.49% and Microsoft Corp. MSFT, +0.76% shares led gainers, while Verizon Communications Inc. VZ, -0.64% and Merck & Co. MRK, -0.81% led decliners.
The S&P 500 index ESU7, +0.02% rose 2 points, or less than 0.1%, to 2,483, with tech shares up 0.4% and consumer discretionary shares up 0.3%. The financials sector, which had been up 0.8% earlier, rose 0.1%.
The Nasdaq Composite Index NQU7, +0.23% added 17 points, or 0.3%, for 6,400.
Should the day’s gains hold, the Dow is on track for its 11th straight daily rise, as well as its 10th straight record close. Those are its longest such streaks since February. Both the S&P 500 and the Nasdaq are on track for their third straight daily rises.
“The backdrop is great: earnings are good, the dollar is weak, and both rates and inflation are low. If that continues, there should continue to be a slog higher,” said James Meyer, chief investment officer at Tower Bridge Advisors.
While recent market action has had a modest upside bias, the moves have been muted; by one metric, this is the quietest market since 1965. The S&P 500 hasn’t had a session where it moved 0.5%, in either direction, since July 19, an abnormally long time. The CBOE Volatility index VIX, +1.41% which was up 4% at 10.34, still traded near its all-time lows.
“In the overall market there’s no supply,” said Ian Winer, head of the equities division at Wedbush Securities. “As stocks go up, a lot of the index funds take the big winners and it’s a self-fulfilling prophecy.”
While stocks grind higher, plenty of investors are looking for a pullback that never seems to come. Including today’s session, the S&P 500 has gone 281 trading days without a pullback of 5% or more.
Winer said there are plenty of reasons for a possible pullback out there — central banks becoming more aggressive at tightening than expected, or reality setting in that 3% GDP growth isn’t going to happen — but for now, markets are complacent with the upward momentum.
Earlier, financials had been the day’s biggest gainers, rising as much as 0.8%, but the sector cooled off by mid afternoon. Among the top-performing stocks in the industry, Fifth Third Bancorp FITB, +1.81% rose 1.8% while Capital One Financial COF, +0.92% was up 1%. J.P. Morgan Chase & Co. JPM, -0.02% shares were flat, after an earlier gain of more than 1%.
Investors have become increasingly bullish on the group. Wells Fargo on Monday reiterated that it was one of four sectors — along with consumer discretionary, health care, and tech — that “currently appear poised for the biggest outperformance.”
Separately, Oppenheimer noted that the group had been “the top-performing sector against falling interest rates since May, when the 10-year U.S. Treasury yield peaked at 2.4%,” adding, “We view positive reactions to bearish information as a sign that the bad news has been discounted and the underlying asset is primed to rally.”
Goldman Sachs listed five reasons why portfolio managers were “ignoring the micro story” of financials, suggesting that even though they are the top-performing sector over the past 12 months — up more than 30% — they still had room to grow.
The reasons include their trading at a relative valuation discount, deregulation tailwinds that weren’t priced into shares, and increases in both buybacks and dividends, which the investment bank said would rise at three times the pace of the overall S&P 500.
Individual movers: Shares in Avis Budget Group Inc. CAR, -9.28% fell 7.1% after the car rental company late Monday posted quarterly results that missed Wall Street’s expectations.
“I don’t know that these companies have bright futures, but the results weren’t as dismal as many people thought,” Meyer said. “If expectations get low enough, you can beat them.”
Dairy giant Dean Foods Co. DF, -20.71% plummeted 20% after its earnings disappointed, while theme park operator SeaWorld Entertainment Inc.’sSEAS, -8.12% revenue missed views and saw its shares fall 4.6%.
Economic news: Sentiment among small-business owners jumped in July, the National Federation of Independent Business said early Tuesday.
Meanwhile, the Labor Department reported on Tuesday that the number of job openings in June vaulted to 6.16 million from 5.7 million in May.