* Dow up 0.2 pct, S&P 500 off 0.04 pct, Nasdaq off 0.2 pct
* After Tuesday's record close, Dow hits an intraday
* Private-sector employers add 198,000 jobs in February
* Caution sets in with VIX up 2 pct
By Angela Moon
NEW YORK, March 6 The Dow set another intraday
record high on Wednesday on signs of improvement in the U.S.
labor market, but trimmed its gains at midday as the broader
market fell on investors' caution that the rally may soon run
The stock market's rally this year has been fueled by signs
of a strengthening U.S. economy, continued support from the
Federal Reserve and fairly attractive equity valuations compared
with other assets.
"There is still a lot more cash to be put into equities,"
said JJ Kinahan, chief derivatives strategist at TD Ameritrade,
"We are seeing investors moving out of the bond market, but
their money is not in the stock market yet. They are still not
full believers (of equities) but they are having cash in hand
because the rally seems to be continuing, and the valuations are
The S&P 500 index is trading at 13.6 times estimated
12-month earnings, compared with around 14.9 times in October
2007 when the index hit its intraday high, according to Thomson
Reuters data. This suggests that stocks are still about 9
percent cheaper than they were at the 2007 peak.
Relative to junk bonds, the earnings yield on the S&P 500 -
the inverse of the P/E ratio and used for valuation comparisons
with bonds - is around 7.5 percent - above the yield to maturity
on junk bonds, which is around 6.5 percent, data showed,
indicating that stocks have a better value than the riskiest
The CBOE Volatility Index, known as the VIX, Wall
Street's favorite barometer of fear, which usually moves
inversely to the S&P 500, rose 2 percent as investors snapped up
protection on concerns that the rally may run out of steam.
"The fact that 20 percent of the S&P 500 companies are
trading at 52-week highs is scaring people, and we are
definitely noticing more call buying on the VIX this morning,"
The S&P has gained 8 percent so far this year and is less
than 2 percent below its record close. The larger S&P 1500
has already reached record highs, thanks to help from
The Russell 3000 Index, which measures the
performance of the 3,000 largest U.S. companies, has also hit a
The Dow Jones industrial average rose 23.38 points,
or 0.16 percent, to 14,277.15. The Standard & Poor's 500 Index
dipped just 0.69 of a point, or 0.04 percent, to
1,539.10. The Nasdaq Composite Index slipped 5.67
points, or 0.18 percent, to 3,218.46.
Energy companies' shares weighed on the market, with Exxon
Mobil down 0.4 percent at $89.23.
The telecom sector also took a toll, with AT&T shares
down 0.5 percent at $36.42.
The slowly healing labor market has been one of the weaker
spots of the recovery, but data on Wednesday showed private-
sector hiring was surprisingly strong in February as companies
added 198,000 employees.
It was an early look at the labor market two days ahead of
the U.S. government's closely watched non-farm payrolls report
on Friday, which is expected to show the economy created 160,000
jobs last month while the unemployment rate held at 7.9 percent.
On Tuesday, the Dow ended at 14,253.77, breaking through
October 2007's record close of 14,164.53. For the year, the Dow
is up about 9 percent. Shortly after trading began on Wednesday,
the Dow punched through the previous session's intraday record,
trading as high as 14,320.65.
The Nasdaq fared worse than the other two indexes on
Wednesday, weighed down by Microsoft after the European
Union fined the company 561 million euros ($731 million) for
failing to offer users a choice of web browser. Microsoft was
down 1.3 percent at $27.97.
Financial shares gained, with the KBW Bank Index up
0.6 percent. Bank of America climbed 2.1 percent to
Staples shares tumbled 6.8 percent to $12.38 after
the largest U.S. office supply chain reported
lower-than-expected quarterly revenue and forecast weak earnings
for the full year.