Dow, S&P 500 notch new highs despite disappointing economic data

It didn't matter that consumer confidence slumped or that retail sales were weak.

The stock market barreled to new highs anyway.

The nation's two closely watched stock barometers — the Dow Jones industrial average and Standard & Poor's 500 index — hit new all-time highs Tuesday. Investors shrugged off disappointing economic data ahead of the holiday shopping season.

The Dow jumped 111.42 points, or 0.7%, to 15,680.35. The S&P 500 climbed 9.84 points, or 0.6%, to 1,771.95. It was the 32nd record high for the Dow this year and the 33rd for the S&P 500.

Stocks have climbed steadily higher lately despite unremarkable economic data, including tepid job growth last month. That has stirred concern that buoyant share prices have grown unmoored from economic reality.

The S&P has jumped more than 24% this year, its best showing in a decade, and the Dow has risen 19.7%. The Nasdaq composite index is up 31%. The Russell 2000 small-cap index has bolted 32%.

Many investors seem to be pinning their hopes less on the fate of the economy than on the chances of the Federal Reserve maintaining its economic stimulus efforts into next year. Weak economic data increase the odds that the central bank will stick to its easy-money policies.

"The only scenario that could upset the Fed is the perception of this froth turning into a bubble," said Jack Ablin, chief investment officer of BMO Private Bank in Chicago. "They're hoping to help the economy, and what they've done so far is help stockholders and homeowners."

Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles, believes the rising market is forcing the Fed to confront fears that it's inflating share prices.

"The market's not being driven by economic cycles," Flam said. "It's being driven by politics and economic bankers."

Consumer confidence fell to its lowest level in six months, the Conference Board said Tuesday. It was the biggest decline since August 2011, and reflected the jitters caused by the government shutdown.

Also, an index of producer prices dropped 0.1% last month, pointing to low inflation but also subdued consumer demand.

Home prices in the nation's largest metro regions rose sharply in August, but the data are nearly two months old.

Retailers had a shaky September, as lukewarm back-to-school shopping and a plunge in car purchases caused sales to slide from August, according to the government.

Retail sales last month amounted to $425.9 billion, down 0.1% from August, the U.S. Census Bureau said. But when stripped of the effects of motor vehicle and parts sales, which fell 2.2%, the gauge was up 0.4%.

Lackluster retail sales are raising concerns about the holiday shopping period, which can account for up to 40% of annual sales for some companies.

This year, the season is limited to four weekends from Thanksgiving to Christmas, down from five last year.

Retailers have to hope for shoppers such as Courtney DeMolay.

The 19-year-old from Fontana works two fast-food jobs and is on the lookout for discounts.

But she's not cowed by the sluggish economy and wasn't rattled by the government shutdown.

"Everyone's scared because we had a little bump in the road. But it really wasn't a big deal," she said.

In September she spent about $50 on clothing. As the weather has grown colder this month she's spent nearly $300 on long pants, beanies, boots, pea coats and bags.

She plans to spend $1,000 on the children in her family for Christmas, more than the $800 she shelled out last year, when she didn't have stable employment.

Copyright © 2016, Los Angeles Times