Market Wrap: Stocks Close Hot August with Another S&P Record

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AP/Richard Drew

By ALEX VEIGA

The Standard Poor’s 500 index (^GPSC) delivered its fourth record high in five days Friday, ending with the biggest monthly gain since February.

The milestone-crushing run capped a week when the SP eclipsed the 2,000-point mark for the first time. And the index ended August with a gain of 3.7 percent.

Six months of solid job gains, strong company earnings and a bevy of corporate deal news contributed to the rally, part of a bull market that’s been rumbling on for more than five years.

The market appeared ready for a correction at the end of July, but the downturn didn’t last long. For most of August, stocks have managed to shake off geopolitical conflicts from Ukraine to Gaza and Iraq.

“The market has a good underlying tone,” said Mike Levine, portfolio manager of Oppenheimer Equity Income Fund. “People feel like the economy is gaining some strength and the job market is getting better and corporate earnings should be pretty good.”

Even in a quiet day of trading ahead of the Labor Day holiday, stocks eked out a gain.

The indexes opened higher, but eased soon after, as investors digested news that consumer spending fell and income growth slowed in July.

Traders also had their eye on the conflict in Ukraine, as a group of European Union foreign ministers accused Russia of invading the eastern region of the country and said Moscow should be punished with more economic sanctions.

The markets began to recoup some losses by midmorning, however, when a gauge of consumer sentiment indicated greater optimism in August, particularly among higher-income groups. Some better-than-expected company earnings also lifted stocks.

Overall, the indexes wavered between small gains and losses throughout the afternoon.

“We’re seeing a listless, pre-holiday market,” said Drew Wilson, an investment analyst at Fenimore Asset Management.

The SP 500 index finished up 6.63 points, or 0.3 percent, to 2,003.37. It closed above 2,000 for the first time on Tuesday and has gained 8.4 percent this year. The Dow Jones industrial average (^DJI) gained 18.88 points, or 0.1 percent, to 17,098.45. The Nasdaq composite (^IXIC) added 22.58 points, or 0.5 percent, to 4,580.27.

Stocks rose broadly, with all 10 sectors in the SP 500 index higher for the day, led by utilities.

The gains marked the index’s best August since 2000.

“It’s been a good August,” said Linda Duessel, senior equity market strategist at Federated Investors. “I imagine it’s the end of the month and people closing their books are saying ‘I better show I’m invested, we had a brand-new high this week,'” she said.

Nevertheless, some investors may be more hesitant next month.

September is widely considered the stock market’s worst month.

Since World War II, the SP 500 index has ended the month with a loss half of the time. Recently, however, September has been good to investors. The SP 500 has turned in a September loss just twice in the last decade: in the depths of the financial crisis in 2008 and following a fight over raising the government’s borrowing limit in 2011.

Last September, investors saw an array of threats lined up after Labor Day, including a fight over the federal budget and a possible U.S. attack on Syria. The result? The SP 500 gained 3 percent.

Elsewhere in the markets, bond prices were little changed. The yield on the 10-year Treasury note held at 2.34 percent.

In metals trading, gold slipped $3 to $1,287.40 an ounce, silver fell 14 cents to $19.40 an ounce and rose a penny to $3.14 a pound.

The price of oil rose for the fourth day in a row on concerns about the escalating tensions between Ukraine and Russia, the biggest oil exporter outside of OPEC. Benchmark U.S. crude rose $1.41 to close at $95.96 a barrel. Brent crude, a benchmark for international oils used by many U.S. refineries, rose 73 cents to close at $103.19. Wholesale gasoline rose 3 cents to close at $2.783 a gallon. Natural gas rose 2.1 cents to close at $4.065 per 1,000 cubic feet.

Among the stocks making big moves Friday:

  • Avago Technologies (AVGO), which makes semiconductors used in smartphones, computer servers and other devices surged $5.73, or 7.5 percent, to $82.09. The big gain came after the company reported earnings that beat analysts’ estimates. Avago rose the most in the SP 500 index and touched an all-time high.
  • Splunk (SPLK) soared 19.1 percent after the data management software developer reported earnings late Thursday that beat expectations. It also raised its full-year profit and revenue estimates. The stock gained $8.64 to $53.93.
  • Tesla Motors (TSLA) and a state-owned Chinese phone carrier announced plans Friday to build 400 charging stations for electric cars in a bid to promote adoption of the technology in China. Tesla increased $5.84, or 2.2 percent, to $269.70.

AP Business Writers Kelvin Chan in Hong Kong and Matthew Craft in New York contributed to this report.

What to Watch Monday:

  • U.S. stock and bond markets are closed for Labor Day.

What to Watch Tuesday:

  • At 10 a.m. Eastern time, the Institute for Supply Management releases its manufacturing index for August, and the Commerce Department releases construction spending for July.
  • When you get into that back office and start signing all the paperwork, the topic of extended warranties will come up pretty quickly. Ellie Kay, an author of 15 finance-related books, notes that such warranties are negotiable.

    “Before you sign on the dotted line, check out other sources of extended warranty pricing,” she says, such as those provided by your bank or insurance company. “Then either use this lower price in the financial and insurance office for negotiation to get them to match the price, or buy it from the other source.”

    A scenario from Kay during her last car purchase: “The dealer quoted me $4,200 for a three-year extended warranty for my 280SLK Roadster Mercedes that included a $250 deductible. USAA — my insurance company — gave me a three-year warranty for $3,200 with zero deductible. I’ve used the new warranty once already. The bill was $1,100 and I paid nothing because of the zero deductible.”

    Bottom line: The default extended warranty is almost always the worst deal.

    1. You’ll get the dealer’s extended warranty

  • You may have a monthly payment figure in your head when shopping for a new car, but your interests are better served when you focus on the out-the-door price instead.

    “A sales rep can often trick you by offering a lower monthly payment, but [one that] will stretch out the terms of the loan,” says David Bakke, a car buying expert at MoneyCrashers.com.

    You can reduce the overall cost of the car via negotiation and by skipping accessories and add-ons. “Things like navigation systems, rims, floor mats or car audio/entertainment systems can be purchased from a third party vendor, usually for less.”

    All our experts agree: Don’t even mention your preferred or maximum monthly payment price.

    2. You’ll negotiate based on your monthly payment

  • 3. You’ll cave on your trade-in price

  • It may be tempting to just head to one local dealership, take a test drive or two, and walk out the door with a new car, but you’ll save yourself a lot more money by doing a little pre-shopping research.

    “Once you have your choices narrowed down to a few makes or models, contact the Internet sales manager of a few dealerships,” suggests Bakke. “These folks can often offer better pricing than what you’d find dealing with an on-site sales person. Plus, you save time.”

    In addition to, or in lieu of, e-shopping, Joshua Duvall of Capital Financial Services says to “find a few vehicles from different manufacturers and pit them against one another.” He explains that the car buying market is based on quantity and the fact that dealers want to move cars. “Force them to compete for your business.”

    4. You won’t shop around enough or do enough research

  • “Dealerships often employ hard-sell tactics that can be overwhelming for a first-time buyer, so it is a good idea to go with someone who has been through the process before,” explains John Ganotis, founder of CreditCardInsider.com.

    Granotis also says that if you’re buying a used vehicle, it’s wise bring along a friend who knows his or her stuff when it comes to car health. For example, a mechanic who can peek under the hood, or recognize if something subtle is wrong during the test drive, would be especially handy.

    5. You’ll go to the dealership alone

  • 6. You’ll buy new

  • OK, so sometimes ol’ Sally breaks down, and you need to get a new set of wheels, stat. If you don’t fall into that category, though, our experts recommend choosing your purchase date strategically, such as during a major sale. Better yet, wait for the end of a promotion.

    Dealership salespeople often receive a bonus if they meet their targets during a promotion. Even if they lose money on a vehicle at the end of a promotion, they typically make up for the loss with their promotion target bonus.

    Erin Konrad of CouponPal suggests buying near the end of the month. This is when salespeople are trying to meet monthly quotas and are more likely to negotiate.

    7. You’ll rush to buy

  • Be familiar with common strategies employed by dealerships and sellers. For example, MSN Money warns against the “four-square” trick. (I’ve had this one used on me.) In this trick, the salesperson draws four boxes with a number in each: your old car’s trade-in value, the new car’s price, the down payment, and your monthly payment. “From there, the salesperson begins crunching numbers — most likely making it too hard for you to follow,” writes MSN. He or she will shift your focus to the monthly payment, which can result in a longer loan and a higher interest rate.

    Another common trick is to heighten your sense of urgency, says Business Insider via Gregg Fidan, founder of RealCarTips.com and the author of “Honest Guide to Buying a Car.” For example, the dealer may tell you “that color is not available; there’s only three left statewide; the price is good only for today; someone else is interested in the car, better decide quickly, etc.” In this case, be patient and courteous, but remain level-headed and never rush to buy. Study up on Fidan’s list of 112 car-buying scams.

    To sum up the list: Don’t let yourself get too caught up in the excitement of shiny metal, and remember that in six months that “new car excitement” will have faded, and you’ll be due for an oil change.

    8. You’ll fall for sales tricks

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