Stocks Rise, Dow on Track for 6th Straight Day of Gains

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Wall Street
Richard Drew/AP
By Ryan Vlastelica

NEW YORK -- U.S. stocks rose Thursday, putting the Dow on track for a record closing high for a sixth straight day as retail names rallied following strong data about the holiday shopping season.

Trading volume was light in the first full day of trading since Monday, following an early close Tuesday and Wednesday's Christmas holiday.

While the market's light action could amplify trading volatility, Wall Street's recent upward bias continued, with the Dow on track for its longest winning streak since March. Both the Dow and the S&P 500 closed at record highs Tuesday.

"I don't get why we seem to have an eternally upward market, but it looks like that's what we have," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "There's no reason to sell stocks, but also not much reason to buy except for that fact that we continue to be poised to go higher."

In a positive sign for economic growth, initial jobless claims fell 42,000 in the latest week, dropping to 338,000 -- the lowest level in nearly a month. Analysts had expected 345,000 new claims.

Retail stocks stayed in the spotlight as the holiday shopping season drew to a close. %VIRTUAL-article-sponsoredlinks%Data published by MasterCard Advisors SpendingPulse said sales between Nov. 1 and Dec. 24 rose 2.3 percent, bucking concerns that the season had been weak.

The S&P retail index jumped 0.8 percent. The stock of Urban Outfitters (URBN) rose 2.8 percent to $37.81 and was the S&P 500's biggest percentage gainer. Online retailer Amazon.com (AMZN) gained 1 percent to $403.12.

The Dow Jones industrial average (^DJI) was up 118.58 points, or 0.72 percent, at 16,476.13. The Standard & Poor's 500 index (^GPSC) was up 8.25 points, or 0.45 percent, at 1,841.57. The Nasdaq Composite (^IXIC) was up 10.74 points, or 0.26 percent, at 4,166.16.

The Dow climbed to an all-time intraday high of 16,480.64, while the S&P 500 hit a record intraday high of 1,842.26.

Energy shares also climbed. Exxon Mobil (XOM) shot up 1.8 percent to $100.97 and helped boost the Dow. Chevron (CVX), another Dow component, rose 1.1 percent to $124.86.

At the end of Tuesday's abbreviated trading session, the Dow marked its fifth straight record closing high and the S&P 500 achieved its third record closing high in a row.

The S&P 500 has soared almost 29 percent this year, largely due to stimulus from the U.S. Federal Reserve. The index is on track for its best year since 1997. The Dow is up 25.2 percent in 2013 while the Nasdaq has jumped about 38 percent.

United Parcel Service said Tuesday that poor weather and a high volume of holiday packages delayed the arrival of Christmas presents around the world. Amazon offered compensation to affected customers with shipping refunds and $20 gift cards.

Shares of UPS (UPS) rose 0.1 percent to $104.52 while peer shipping company FedEx (FDX) gained 1.1 percent to $143.49.

In another black eye for the retail industry, the hackers who attacked Target (TGT) and compromised up to 40 million credit cards and debit cards also managed to steal encrypted personal identification numbers, a senior payments executive told Reuters.

The retail chain's stock rose 1.1 percent to $62.45, though it remained down 1.7 percent over the past five sessions.

In the telecom sector, sources close to the matter told Reuters that Japan's SoftBank was in talks to buy T-Mobile US. Shares of T-Mobile (TMUS) traded at their highest levels since 2007, gaining 0.8 percent to $32.45 in late afternoon trading. The stock was slightly off an intraday high at $32.89.

In other markets, U.S. benchmark Treasuries yields edged higher and were just below their two-year high of 3 percent. Analysts said that if yields stay at that level for an extended period, it might be a negative for stocks and other risky assets.

Stocks Rise, Dow on Track for 6th Straight Day of Gains

Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.

Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.

Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.

The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.

Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?

If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.

Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."

Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.

Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.

Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"

Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.

Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.

Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.

The vast majority of financial products are sold by people whose only interest in your wealth is the amount of fees they can sucker you out of.

You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.

This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.

"Everything else is cream cheese."
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