NEW YORK (Reuters) - U.S. shares edged higher into record territory on Tuesday, backed by stronger-than-expected manufacturing data that in turn spurred U.S. Treasury yields to 2-1/2 year highs on a belief the economy is on a sustained path of recovery.
In thin pre-Christmas holiday trading, the positive economic data contributed to gains for the U.S. dollar against its major trading partners such as the euro zone and Japan.
An errant trade sent copper prices to their highest level since April in New York COMEX trade, a source familiar with the matter told Reuters. Prices were adjusted down after the discovery of the error, the source said.
U.S. share prices posted modest gains. The Dow Jones industrial average .DJI rose 62.94 points or 0.39 percent, to close at a record 16,357.55. The S&P 500 .SPX gained 5.33 points or 0.29 percent, to hit a record 1,833.32. The Nasdaq Composite .IXIC added 6.513 points or 0.16 percent, to finish at 4,155.417. The U.S. stock markets closed early at 1 p.m. EST.
“Investors have taken their positions for the year, so what we’re seeing is a market pause to digest the very strong rally we’ve had,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
U.S. durable goods orders for November surged 3.5 percent on rising demand for goods across a spectrum of industries, from aircraft to machinery and computers and electronic products.
In a second report, government data showed November new home sales fell from a five-year high, dropping by 2.1 percent. However, October’s sales were revised to their highest level since July 2008.
The stronger economic data supports the U.S. Federal Reserve’s decision last week to start trimming its monthly bond purchases as the economy might be gathering more upward momentum into early 2014.
“The path of least resistance right now is lower bond prices and higher yields,” said John Brady, managing director of interest rate futures sales at R.J. O‘Brien and Associates in Chicago.
In thin trade, the benchmark 10-year U.S. Treasury bond fell 13/32 of a point in price, driving the yield up to 2.98 percent and just shy of a 2-1/2 year high. <US/>
Japanese equity prices hit a six-year closing high of 15,889.33 .N225, putting the Nikkei on track for its best year since 1972.
Shares in Shanghai .SSEC closed with modest gains, with an early rise cut down by weak banking stocks.
The People’s Bank of China injected funds through normal channels for the first time in three weeks, although traders warned that conditions remained tense.
“The relief is quite palpable after the cash injection by the PBOC today,” said Jackson Wong, Tanrich Securities vice-president for equity sales.
Much of Europe's stock markets were closed ahead of the holiday. The euro zone blue chip Euro STOXX 50 .STOXX50E rose 0.06 percent on Tuesday but rose 4.5 percent in the five days leading into the Christmas break. That's the best week before the holiday since 1999, Thomson Reuters data showed.
In the currency markets, the U.S. dollar index .DXY, a measure of the greenback’s value against a basket of six currencies, rose 0.09 percent to 80.531 in thin trading. The euro fell 0.17 percent to $1.3673.
Gold edged higher as bargain hunters appeared after prices fell to six-month lows of around $1,200 an ounce. U.S. gold futures’ benchmark February contract settled up 0.5 percent at $1,203.30.
However, the improving global economic environment, coupled with a rally on world stock markets, has driven investors away from traditional safe-haven assets such as gold. For the year, gold is down 28 percent and set for its biggest annual decline in 32 years.
In the oil markets, civil unrest in South Sudan pushed Brent crude $112 a barrel. U.S. oil futures rose 0.26 percent to $99.17 a barrel.
GRAPHIC: Mortgage applications link.reuters.com/guv37s
GRAPHIC: Durable goods link.reuters.com/baf65v
GRAPHIC: New home sales: link.reuters.com/tep65v
Links to main market reports
<MKTS/GLOB> - Global markets <O/R> - Oil markets
<FRX/> - FX markets <EMRG/FRX> - Emerging markets
<GVD/EUR> - Euro sovereign debt <MET/L> - Metals
<US/> - U.S. Treasuries .EU - European stocks
.T - Japanese stocks .N - U.S. stocks
<MMT/> - Money markets
Additional reporting by Richard Leong, Ryan Vlastelica, Josephine Mason, Sudip Kar-Gupta, Lisa Twaronite, Wayne Cole, Blaise Robinson and Simon Falush; Editing by Dan Grebler and Nick Zieminski