U.S. stocks extend gains on stress tests

SAN FRANCISCO (MarketWatch) � U.S. blue-chip stocks finished higher Wednesday, with the Dow extending its winning streak to a sixth session, as investors showed relief about largely positive bank stress tests and U.S. economic data, but grew wary about the recent strength in equities.

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�The fact that 15 of the most important of the Fed�s children �passed� the hypothetical stress test, along with �hopeful� signs that the economy may be improving led to a buying spurt at the market�s close,� said Robert Barone, a portfolio manager and partner at Universal Value Advisors in Reno, Nev.

�Yet, trading volume remains low, indicating a lack of strong conviction. Suspicions linger regarding the health of the U.S. and world economies,� he said.

The Dow Jones Industrial Average DJIA �rose 16.42 points, or 0.1%, to close at 13,194.10. A 4.1% rise in Bank of America Corp. BAC �shares and a 3.5% gain in shares of American Express Co. AXP led the gains.

After reaching multi-year highs in recent sessions, gains may be limited, one investor said.

�Investors want to protect their profits, and are prepared to do so, at the first sign of anything contradictory to all the positive momentum,� said Robert Laura, president of Synergos Financial Group in Brighton, Michigan. �Gravity applies to everything � and with expectations sky high and growing higher every day, it�s inevitable.�

Laura said he expects the Dow to close out the week lower, with the index ending the month well below 13,000.

The S&P 500 SPX �ended slightly lower Wednesday, down 1.67 points, or 0.1%, at 1,394.28. The index, which traded as high as 1,399.42 during the session, hasn�t traded or closed at the 1,400 level since June 2008.

Both the S&P 500 and Dow posted gains over the previous five sessions in a row.

For equities, �the trend is definitely up and it�s basically raining money in the world with all the liquidity from world banks, which will keep corrections short,� said Keith Springer, president of Springer Financial Advisors.

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In the short term, however, Matthew Tuttle, chief investment officer at Tuttle Wealth Management LLC in Stamford, Conn., said equities are �a little overbought at this point.�

He also voiced concern that emerging markets and commodities weakened on Wednesday, even though the S&P 500 was nearly unchanged. �Longer term, [that�s] not an issue, but could mean a little selloff is in our near future.�

Utilities lost the most ground among the S&P 500�s 10 industry groups, while the tech and financial sectors gained.

The Nasdaq Composite COMP �tacked on 0.85 point to end at 3,040.73. On Tuesday, it ended above 3,000 for the first time in 11 years, boosted by a nearly 3% rise in Apple Inc. AAPL �shares.

Apple shares extended their gains into Wednesday, closing up 3.8%. Read more on what�s driving Apple higher.