Wall Street hits fresh records overnight

Specialist Michael Pistillo, left, works with traders at his post on the floor of the New York Stock Exchange. File photo / AP

Wall Street touched fresh record-highs overnight after a report showing a stronger-than-expected pace of growth in US manufacturing bolstered optimism about the outlook for the economy and corporate profits.

The Institute for Supply Management's factory index rose to 59 last month, up from 56.6 in September and matching a 3-1/2 year high reached in August.

"The overall growth outlook remains very resilient as the underlying strength in domestic demand clearly outweighs potential external headwinds," Harm Bandholz, chief US economist at UniCredit Research, told Reuters.

To be sure, construction spending fell 0.4 per cent to an annual rate of $950.9 billion in September, a Commerce Department report showed.

In afternoon trading in New York, the Dow Jones Industrial Average eked out a 0.03 per cent gain, the Standard & Poor's 500 Index rose 0.24 per cent, while the Nasdaq Composite Index added 0.38 per cent. Earlier in the session, both the Dow and the S&P 500 hit record highs, touching 17,398.54 and 2,024.46 respectively.

"The bull market may be old and wrinkly, but it is still alive and there's nowhere else for investors to really go besides US equities," Paul Schatz, president and chief investment officer at Heritage Capital in Woodbridge, Connecticut, told Reuters.

In the Dow, gains in shares of American Express and those of Boeing, up 1.3 per cent and 0.8 per cent respectively, outweighed slides in shares of Home Depot and those of Coca-Cola, down 1.3 per cent and 0.6 per cent respectively.

The latest round of US quarterly earnings has also helped.

"We're continuing to focus on earnings, which by and large seem pretty good," Walter Todd, chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates, told Bloomberg News.

Acquisitions helped propel some shares. Shares of Sapient soared 42 per cent after Publicis agreed to buy the company for US$3.7 billion, while shares of Covance rallied 25 per cent after Laboratory Corp of America Holdings agreed to buy the company for about US$6.1 billion. Shares of LabCorp fell 8.1 per cent.

Bill Gross, in his second investment outlook since joining Janus Capital Group, warned deflation was a "growing possibility".

Central banks around the world have made "a damn fine attempt" at bolstering inflation, Gross wrote, but it's "not working like it used to, the trillions seem to seep through the sandy loam of investment and innovation straight into the cement mixer of the marketplace. Prices go up, but not the right prices. Alibaba's stock goes from US$68 on opening day to US$92 in the first minute, but wages simply sit there for years on end."

"One economy (the financial one) thrives while the other economy (the real one) withers," Gross wrote.

In Europe, the Stoxx 600 ended the session with a 0.8 per cent drop from the previous close, as did Germany's DAX. The UK's FTSE 100 Index and France's CAC 40 both declined 0.9 per cent.