Stocks: S&P 500 hits new all-time closing high

Adam Shell and Kim Hjelmgaard, USA TODAY | USATODAY

NEW YORK -- The Standard & Poor's 500 index closed at a new all-time high Monday as investors were buoyed by positive economic reports.

The benchmark stock index topped its April 11 closing high of 1593.37 in afternoon trading, erasing a brief downturn that had shaved roughly 3% off the large-company stock index.

It later retreated but bounced a smidgen back into record territory in the last moments of the trading day. The new closing high: 1593.61, a gain of 11.37 on the day for an increase of 0.7%.

The yield on the bellwether 10-year Treasury note fell to 1.65% Monday, the lowest this year, before rebounding modestly to 1.67% later in the day. The previous low yield was 1.66% Friday, according to Tradeweb.

Bond yields typically fall when traders think the economy is weakening and inflation isn't a danger. Also weighing on Treasury yields: The Federal Reserve's program of buying long-term bonds to keep interest rates, particularly mortgage rates, low.

Investors were in a buying mood after a better-than-expected start to the first-quarter earnings season and fresh signs that the U.S. housing recovery remains intact.

The government reported that personal consumption expenditures rose 0.2% in March and the National Association of Realtors said pending contracts to buy homes last month were at their highest level in three years.

The Dow Jones industrial average (up 106 points) and Nasdaq composite gained 0.7% and 0.85%, respectively.

Stock price gains continue to be driven by the Federal Reserve's "easy money" policy and a lack of investment alternatives, as bond yields remain at historic lows and commodity prices suffered a major correction in recent weeks.

Gold prices rose 1.1% to about $1,470 per ounce but are still well below the recent peak of $1,803 an ounce hit in late 2012.

On the earnings front, nearly seven out of 10, or 69%, of the 274 companies in the S&P 500 that have reported first-quarter earnings have topped expectations, vs. the long-term average of 62%, according to Thomson Reuters.

Earnings growth for the quarter is trending at a 3.9% rate, up from 1.5% on April 1. Still, Wall Street is uneasy with just 43% of companies topping revenue forecasts, which suggests sales are slowing.

One major Wall Street bull says the market's pause the past few weeks is a sign that the corrective action in the market suggests it is more about it marking time after its sharp run-up, rather than a major price drop.

"We believe investors should stay the course and use near-term pullbacks to add to their positions," says Craig Johnson, a technical analyst at Piper Jaffray.

Johnson sees the S&P 500 hitting 1,700 by the end of 2013, or more than 6% higher than current levels. He also predicts the broad market gauge will hit 2,000 in 2014.

In contrast, Wall Street's most cautious investment strategist, Gina Martin Adams of Wells Fargo Securities, reiterated today that she is sticking to her year-end target of 1,390 for the S&P 500, which equates to a drop of nearly 13% from current levels.

Part of Adams' hesitancy to commit to stocks has to do with her belief that full-year earnings will come in softer than analysts expect. She is expecting full-year profit growth of 1.5% for the S&P 500, which is far less than the current consensus of a 7.9% gain.

"The earnings outlook continues to dim," she told clients in a report Monday.

On Friday, the Dow closed up 0.1%, to 14,712.55. The S&P 500 finished down 0.2% to 1,582.24. And the tech-laden Nasdaq composite index ended down 0.3% to 3,279.26.

Asian stock markets mostly rose on Monday as investors awaited the European Central Bank's interest rate decision later this week. The U.S. government said Friday that the economy expanded at a 2.5% annual rate in the first quarter, falling short of expectations of 3% growth.

Japan's Nikkei 225 index lost 0.3% to 13, 884.13.

European shares saw gains. the U.K.'s FTSE 100 index was up 0.19%; Germany's DAX 30 was up 0.45%; and France's CAC 40 was up more than 1%.

Benchmark oil for June delivery was up $1.21 to $94.21 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 64 cents to $93 a barrel on Friday.

Contributing: USA TODAY's John Waggoner, The Associated Press