U.S. stocks rose Tuesday, lifting the Dow Jones Industrial Average to its highest intraday level in more than two years, as data showing growth in U.S. retail sales and business sales boosted investors’ outlook on the economy.
The Dow rose 71 points, or 0.6 percent, to 11,499. Earlier, the measure hit 11499.70, its highest intraday level since September 2008. Its top performers spanned a variety of sectors, with Boeing up 1.4 percent, Kraft Foods up 1.3 percent and Johnson & Johnson up 1.2 percent.
Coca-Cola led a handful of decliners in the Dow with a 1.3 percent drop. The company warned that its recent acquisition of the North American operations of its largest bottler would be slightly dilutive to fourth-quarter results.
The Nasdaq Composite rose 0.4 percent, to 2,635, and the Standard & Poor’s 500 index added 0.4 percent to 1,245.
Health-care stocks led the S&P 500’s climb as questions continued to arise over the constitutionality of the federal health care overhaul. Two federal judges in Virginia issued diametrically opposed decisions on the matter. In both lawsuits, the plaintiffs contend the mandate exceeds Congress’s constitutional power to regulate interstate commerce.
Consumer stocks were also strong, with Hasbro rising 1.7 percent and Abercrombie & Fitch advancing 1.2 percent, boosted by a bigger-than-expected increase in U.S. retail sales for November.
But Best Buy tumbled 15 percent after it issued a dour report for the quarter ended Nov. 27, which included Black Friday. Best Buy’s same-store sales fell 3.3 percent in the quarter and its earnings came in well below analysts’ estimates as revenue unexpectedly fell. The consumer-electronics retailer also cut its earnings view for the year.
“That was a little bit surprising,” said Uri Landesman, president at Platinum Management, a hedge fund. Still, he added that investors are reading Best Buy’s report as more of a company-specific issue than a warning sign for the broader retail sector.
“It could be that you’re seeing the Wal-Marts and the Costcos of the world stepping in and taking some share here,” he said. Wal-Mart shares rose 0.4 percent while Costco Wholesale added 0.4 percent.
Investors were pleased to see inventories at U.S. businesses rose less than expected in October as auto dealers and other retailers sold goods faster than they replenished stockrooms. U.S. business sales rose 1.4 percent, to $1.119 trillion, the highest business sales figure since September 2008.
“That’s a very good sign if we see it continued,” Landesman said. “That needs to happen for this economy to sort of transfer to the next stage of its growth. You need to see an increase in demand so you’d like to see an inventory drawdown.”
The market is also benefiting from technical factors as well as “people wanting to dress up their books to show they’re fully invested, given the run-up that we’ve had the last (few) months,” Landesman said.
He noted that the S&P 500 index appears to have “pretty serious support” around the 1,225 level, while he doesn’t see any major obstacles between the measure’s current level and 1,300. Landesman is predicting that the S&P 500 “certainly sniffs at, if not at least intraday hits, 1,300″ by year-end.
Tuesday’s activity comes as investors await the Federal Open Market Committee’s latest policy statement, due around 2:15 p.m. EST. The market isn’t expecting any changes in the FOMC’s policy direction, but will keep a close eye on the language it uses to assess the economy and how its $600 billion stimulus package is faring so far.
Overseas, data showed German economic expectations improved for the second consecutive month in December, allaying immediate concerns about a deepening debt crisis in the euro zone’s periphery.
Also in the euro zone, Prime Minister Silvio Berlusconi narrowly won a confidence vote in the lower house of the Italian Parliament on Tuesday.
But the biggest concern for U.S. investors is “what’s happening with regard to a systematic approach to the debt crisis in Europe,” said Adrian Cronje, partner and chief investment officer at Balentine. “There’s been no specific news flow today to move that debate in one way or another,” he added.
The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, edged up 0.2 percent. Treasurys fell, lifting the yield on the 10-year note up to 3.38 percent. Crude-oil futures slipped while gold futures also declined.
