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The Dow and the S&P 500 closed at record highs for the second consecutive session on Tuesday driven by an upward revision of March’s retail sales data and encouraging small-business sentiment. However, the Nasdaq ended in negative territory after Cisco forecasted disappointing fiscal third quarter results. A new deal between Keurig Green Mountain and Coca-Cola was also welcomed by the investors. For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 0.1% to close Tuesday’s trading session at 16,715.44. The Standard & Poor 500 (S&P 500) went up a meager 0.04% to finish at 1,897.45. The tech-laden Nasdaq Composite Index dropped 0.3% to 4,130.17. The fear-gauge CBOE Volatility Index (VIX) dropped 0.8% to settle at 12.13. Total volume for the day was roughly 5.5 billion shares, lower than this month’s average of 6.1 billion. Decliners outpaced advancing stocks on the NYSE. For 54% stocks that declined, 43% advanced.
The U.S. Department of Commerce reported that seasonally adjusted sales of retail and food services edged up 0.1% in April, less than the consensus forecast of it rising by 0.3%. However, the bearish tone of the less-than-expected increase in retail sales was offset by the upward revision of the March’s data. Investors cheered the upward revision of March’s retail sales data to 1.5% from 1.1%, which marked the biggest gain in four years.
Excluding motor vehicles sales, retail sales in April were flat after rising 1.0% in March. The consensus expected retail sales, excluding sales of motor vehicles to increase by 0.5%.
Separately, sales increased at car dealers, gasoline stations, department stores, clothing outlets and building materials stores. However, sales decreased at Internet retailers, furniture stores, food services and drinking places.
Retail stocks mostly ended in the red due to the less-than-expected rise in retail sales. Stocks such as apparel & footwear company Bebe Stores, Inc. (NASDAQ:BEBE), discount stores company Family Dollar Stores Inc.(NYSE:FDO), drugstore chain Vitamin Shoppe, Inc. (NYSE:VSI), food retail company The Fresh Market, Inc.(NASDAQ:TFM), home improvement chain Lowe's Companies Inc. (NYSE:LOW) and specialty stores company Bed Bath & Beyond Inc.(NASDAQ:BBBY) decreased 1.4%, 0.6%, 0.4%, 2.1%, 1.1% and 0.8%, respectively.
Upbeat small-business sentiment data was also welcomed by the investors. According to the National Federation of Independent Business, small-business sentiment in May rose to 95.2, the highest level in more than six years.
Separately, the U.S. Department of Commerce reported that business inventories increased 0.4% in March. This was in line with the consensus estimate.
Merger and acquisition activity in the consumer goods sector also boosted investor sentiment. Keurig Green Mountain, Inc. (NASDAQ:GMCR) gained the most among the S&P 500 companies after The Coca-Cola Company (NYSE:KO) said that its subsidiary, Atlantic Industries, raised its stake in the coffee-brewer manufacturer to 16% from 10%. Coca-Cola is buying another 2.8 million shares of Keurig for $107.76 per share. This move will make Coca-Cola the largest shareholder of Keurig. Shares of Keurig and Coca-Cola increased 7.6% and 0.7%, respectively.
However, decline in Cisco Systems, Inc. (NASDAQ:CSCO) dragged the Nasdaq down. Shares of Cisco Systems decreased 1.4% after the company forecasted dismal fiscal third quarter results. For the third quarter, Cisco expects revenues to decrease in the range of 6% to 8%, which indicates sales of $11.2 billion to $11.5 billion on a year-over-year basis. This is less than the year-ago period sales figure of $12.22 billion. Also, analysts expect Cisco to report earnings per share of 48 cents, less than year-ago earnings of 51 cents per share. The company is set to report third-quarter fiscal 2014 results on May 14.
Seven out of 10 sectors of the S&P 500 ended in the green. The Energy Select Sector SPDR (XLE) led the advance among the S&P 500 sectors. The sector increased 0.4%. Top holdings from the sector such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), Occidental Petroleum Corporation (NYSE:OXY) and EOG Resources, Inc. (NYSE:EOG) increased 0.1%, 0.5%, 0.3%, 1.1% and 1.5%, respectively.
The Utilities Select Sector SPDR (XLU) advanced 0.2%. Key stocks from the sector such as NextEra Energy, Inc. (NYSE:NEE), Dominion Resources, Inc. (NYSE:D), Southern Company (NYSE:SO), Exelon Corporation (NYSE:EXC) and American Electric Power Co., Inc. (NYSE:AEP) increased 0.3%, 0.7%, 0.1%, 0.7% and 0.9%, respectively.