US STOCKS-Dow, S&P 500 hit new highs; investors confident in rally

Wed May 15, 2013 2:53pm EDT

* Upward momentum persists, Internet shares among day's gainers

* Apple leads Nasdaq lower; hedge fund cuts stake in the company

* Credit Suisse fear barometer falls to one-year low

* Dow up 0.2 pct, S&P 500 up 0.2 pct, Nasdaq off 0.1 pct

By Angela Moon

NEW YORK, May 15 (Reuters) - U.S. stocks edged up on Wednesday, with the Dow and S&P 500 hitting new all-time highs as the market's recent upward momentum persisted, but a steep decline in Apple kept gains in check.

The day's gains were broad, with eight of the S&P 500's 10 sectors trading higher. Among the top gainers were the S&P consumer staples index, up 0.8 percent. In contrast, the S&P energy index slid 0.8 percent and was the S&P 500's biggest decliner.

Further strengthening the rally, an options gauge looking at the level of anxiety showed signs that investors are placing optimistic wagers on the stock market, positioning for the current run-up to extend for the next three months.

The S&P 500 and the Nasdaq have risen for four straight sessions, extending their gains for the year. Equities have rallied in recent weeks as investors bet that central bank stimulus measures will keep supporting market gains.

Such policies have helped spur advances of about 15 percent in major U.S. indexes this year despite data showing some signs of lackluster growth.

In the latest reads on the economy, activity in New York state's manufacturing sector unexpectedly contracted in May, falling to minus 1.43 from 3.05, below expectations for an increase to 4. Another report showed that U.S. industrial production fell 0.5 percent in April, more than expected.

"We've seen the pace of growth ebb and flow in the past and I think investors may be getting more used to the fact that there are going to be pauses and it's not too surprising we're seeing one now," said Kate Warne, investment strategist of St. Louis-based Edward Jones.

"In the past it hasn't meant much for stocks and they're concluding it probably doesn't mean much now."

The Dow Jones industrial average was up 29.70 points, or 0.20 percent, at 15,244.95. The Standard & Poor's 500 Index was up 4.90 points, or 0.30 percent, at 1,655.24. The Nasdaq Composite Index was up 1.21 points, or 0.03 percent, at 3,463.82.

During the session, the Dow touched an all-time intraday high at 15,301.34, while the S&P 500 reached a record intraday peak at 1,661.49.

The Nasdaq dipped into negative territory with Apple leading the decline. Apple shares were off nearly 4 percent at $426.29 on news that a prominent hedge fund has cut their its stake in the tech giant. Earlier, the Nasdaq had hit a fresh 52-week high at 3,475.48.

The Credit Suisse Fear Barometer, known as the CSFB Index, fell 11.4 points over the past two weeks - the largest decline on record - and is now at a one-year low of 21.73.

"A low CSFB reading is a constructive signal for the market," Credit Suisse equity derivatives strategist Mandy Xu wrote in a note to clients.

The indicator essentially tracks the willingness of investors to pay for downside protection with zero-premium so-called collar trades that expire in three months using S&P 500 index options.

Agilent Tech was one of the S&P 500's top percentage gainers a day after the company posted adjusted earnings that beat expectations and doubled its stock buyback program to $1 billion. The company also said it would cut 2 percent of its global work force. Shares rose 4 percent to $45.73.

Tech shares also got a lift from Netflix Inc, up 3.7 percent at $242.70, and Yahoo Inc, up 2.3 percent at $27.25. In contrast, Computer Sciences Corp was the S&P 500's biggest loser, dropping 10 percent to $44.39 after reporting results.

Deere & Co fell 4.6 percent to $89.48 after the farm equipment maker gave a cautious outlook, though earnings were stronger than expected.

Shares of Bristol-Myers Squibb rose 5.3 percent to $44.41 in anticipation of favorable data from clinical trials of its melanoma drug. Limited data is expected to be released this evening ahead of the annual meeting of the American Society for Clinical Oncology, which begins on May 31.

In other data released on Wednesday, the U.S. Producer Price Index recorded its largest drop in three years in April, falling a seasonally adjusted 0.7 percent.