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VOL. 39 | NO. 8 | Friday, February 20, 2015

Slight gains push US stocks to record highs; Home Depot up

The Associated Press

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The Dow Jones industrial average and the Standard & Poor's 500 index delivered a new set of record highs Tuesday, beating marks they set last week.

The Nasdaq composite also built on its gains for the year, finishing higher for the 10th day in a row.

The latest milestones came as investors liked what they heard from Federal Reserve Chair Janet Yellen, who told Congress the central bank would be patient about raising interest rates as the economy improves.

"Markets had been very focused on the Yellen testimony and wanted to see if there was going to be any change in the outlook for the first Fed rate hike," said David Lefkowitz, senior equity strategist for UBS Wealth Management Research. "The short answer to that is, not really. The Fed is, at a minimum, not going to do anything imminently."

Progress in Greece's efforts to secure an extension of its rescue program and strong earnings from Home Depot also encouraged traders. The home-improvement retailer was the best performer in the 30-company Dow, rising 4.4 percent.

The Dow ended up 92.35 points, or 0.5 percent, to 18,209.19. That's up 0.4 percent from its most-recent high of 18,140.44 on Feb. 20.

The S&P 500 gained 5.82 points, or 0.3 percent, to 2,115.48. The index reached its previous high of 2,110.30 on Feb. 20.

The Nasdaq gained 7.15 points, or 0.1 percent, to 4,968.12. The index, which has yet to eclipse its record high from the dot-com era, in now within 81 points of that March 2000 peak.

The three main U.S. stock indexes are all up for the year. The S&P 500 has now a record close four times this month. The Dow has done it twice.

The current bull market, now in its sixth year, has been powered by strong corporate earnings growth and low interest rates, which make stocks more attractive relative to bonds.

Yellen's remarks to Congress on Tuesday suggest that the interest rate part of that dynamic isn't likely to change right away.

In the first part of her two-day testimony, Yellen noted that the U.S. economy is making steady progress, but that for now the Fed will remain patient about raising interest rates because the job market is still healing and inflation is too low. Yellen's use of the word "patient" means a rate hike is unlikely for at least the next two meetings, she said.

The Fed has kept its benchmark rate near zero since 2008. Yellen's testimony supports the view that a rate increase is not likely before June or even later this year.

"It's a little bit uncertain on when exactly they'll raise rates, but it's not going to happen sooner than expected," Lefkowitz said.

The major stock indexes spent much of Tuesday morning drifting between small gains and losses as traders awaited Yellen's remarks and kept tabs on developments in Greece.

Greece and its bailout creditors reached a tentative agreement last week to continue a rescue loan program by four months to avoid the risk of a Greek default and exit from the euro currency. On Tuesday, the country's European creditors approved a 4-month extension to the nation's financial bailout.

"It was not unexpected, but welcome news," said Brad Sorensen, director of market and sector analysis at the Schwab Center for Financial Research. "We don't have to worry about that for at least a few weeks, anyway."

The news helped lift stocks indexes in Europe, including Britain's FTSE 100, which edged up 0.5 percent to 6,949, a record high. France's CAC-40 rose 0.5 percent to 4,886 while Germany's DAX gained 0.7 percent to 11,205. The Athens Stock Exchange General Index jumped 9.8 percent.

Investors also got a batch of new U.S. economic data Tuesday.

A key gauge of U.S. home prices showed that prices rose 4.5 percent in December versus a year earlier. The small gain comes after price increases slowed for 12 straight months. Meanwhile, the Conference Board reported that its consumer confidence index dropped this month to 96.4 from a revised 103.8 in January. The February and January readings are the highest since before the recession started in December 2007.

All told, nine of the 10 sectors in the S&P 500 index rose, led by utilities stocks. Health care stocks declined.

Home Depot rose after the company reported fourth-quarter financial results and a full-year outlook that exceeded Wall Street's expectations. The company also said it has authorized an $18 billion buyback of its shares and boosted its quarterly dividend by 26 percent. The stock rose $4.47, or 4.4 percent, to $116.75.

U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 1.98 percent from 2.06 percent late Monday.

The price of oil fell for the fifth day in a row on expectations of rising inventories in the U.S. Benchmark U.S. crude fell 17 cents to close at $49.28 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell 24 cents to close at $58.66 in London.

In other futures trading on the NYMEX, wholesale gasoline fell 2.6 cents to close at $1.620 a gallon, while heating oil fell 18.9 cents to close at $2.029 a gallon. Natural gas rose 2.3 cents to close at $2.902 per 1,000 cubic feet.

In metals trading, gold edged down $3.50 to $1,197.30 an ounce, silver lost seven cents to $16.19 an ounce and copper rose six cents to $2.65 a pound.

Among other stocks making big moves Tuesday:

— First Solar jumped 10 percent a day after the solar power company said it plans to combine some of its assets with SunPower into an investment vehicle that is intended to provide steady dividends. First Solar led the gainers in the S&P 500, adding $5.06 to $54.70.

— Macy's reported better-than-expected earnings for the fourth quarter, but the retailer issued a forecast that fell short of Wall Street's expectations. The stock dipped $2.06, or 3.2 percent, to $62.10.

— Rosetta Resources slumped 15 percent after the oil and gas company reported worse-than-expected fourth-quarter earnings and said it is deferring production growth. Its shares slid $3.29 to $18.58.

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