The Nasdaq Composite narrowly logged its second record close of 2016 on Tuesday, as losses in oil prices and weak productivity data all but erased gains for the broad benchmarks.
The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.84% /zigman2/quotes/210599714/realtime SPX -0.84% ended up less than a point at 2,181.74, after setting a record high of 2,187.69 earlier in the day. Gains in health-care and consumer-staples stocks were offset by losses in energy and materials sectors, weighed down by the drop in oil prices.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.47% closed up 3.76 points, or less than 0.1%, at 18,533, supported by gains for Walt Disney Company /zigman2/quotes/203410047/composite DIS -1.42% and Pfizer Inc. /zigman2/quotes/202877789/composite PFE +0.11% but weighed down by a 0.7% decline in E.I. DuPont de Nemours & Co. /zigman2/quotes/203606582/composite DD +1.00% . The blue-chip gauge ended 0.3% below the all-time closing high of 18,595.03 established on July 20.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.27% gained 12.34 points, or 0.2%, to 5,225.48—an all-time closing high.
Wall Street struggled to shrug off a weaker-than-expected report on U.S. productivity, which has now declined in three straight quarters, according to new data released Tuesday. Second-quarter productivity unexpectedly fell 0.5%, well below expectations.
But a thirst for yield-rich assets continued to support demand for stocks, analysts said, despite falling corporate earnings and unsteady economic fundamentals.
“Investors are chasing [yield] anywhere they can find it. As long as companies keep paying dividends, they’re fine. But some are paying out more than they’re earning,” said Lamar Villere, a portfolio manager at investment manager Villere & Co.
Another reason for the sluggish but sustained advance is that many investors are “hiding out” in the U.S. equity market, piling into sectors traditionally viewed as safety plays in times of uncertainty, such as utilities and telecom—two sectors that are leading the market year-to-date. Telecom is up 19.4% year to date, while utilities boast a 16.7% gain in 2016.
At the same time, the market has been “quite boring for nearly a month now, which we can easily blow off as being part of the summer doldrums,” said Frank Cappelleri, technical analyst at Instinet, in emailed comments.
Cappelleri said investors should view the muted summer moves as a positive indication that the market is settling into a new trading range, after breaking out to all-time high levels.
“Low volatility is a classic trait of an uptrend. And uptrends are boring whether they happen in August or a typically more emotional period,” Cappelleri said, pointing to the market's seeming inaction in November 2014 as a “classic example” of a “boring” market showing a positive uptrend.
Some investors were also holding on to lingering optimism following the stellar jobs report released on Friday, which helped propel the S&P 500 and the Nasdaq score record highs.
“This mood of optimism has seen a recovery in not only the dollar, but also risk appetite, that has pulled equities and commodities such as oil higher. But can these moves continue with a stronger dollar?” said Richard Perry, analyst at Hantec Markets, in a note.
Economic news: A flurry of data released on Tuesday painted a mixed picture of the U.S. economy.
Wholesale inventories rose a revised 0.3% in June, up from the initial estimate of no change, the Commerce Department said Tuesday, suggesting that inventories might not be as big a drag on second-quarter growth as initially estimated.