Summary

Wall Street’s major domestic equity indexes extended their New Year rally to close at record levels on Tuesday the result of investor optimism ahead of quarterly earnings reports and hopes for easing tensions with North Korea.

Defensive S&P sectors – utilities, real estate and telecommunications – were out of favor, while bank stocks capitalized on rising 10-year Treasury yields. Healthcare stocks rose with the sector in focus on the second day of an industry conference.

The S&P 500 and Nasdaq registered their sixth closing record highs in a row. The Dow Jones Industrial Average also ended at a record high after it ending a 3-day run of closing highs in Monday’s session.

Some investors were reassured that North and South Korea held their first talks in more than two years, which Washington described as a good first step in solving the North’s nuclear missile program crisis. Pyongyang said it would not discuss weapons that were aimed only at the United States.

Profits for S&P 500 companies are expected to rise 11.8 percent in the fourth quarter, compared with an 8-percent increase a year earlier, according to Thomson Reuters I/B/E/S.

The S&P financial sector ended 0.8 percent higher after yields on the 10-year U.S. Treasury note hit a 10-month high after the Bank of Japan said it will trim its purchases of Japanese government bonds.

Interest-rate sensitive utilities and real estate sectors ended 1 percent lower while the telecommunications sector fell 1.8 percent.

While investors are hopeful about global economic growth and tax-cut led gains for corporate earnings, they are anxious about whether the tax-overhaul could overheat inflation and lead to a sharper than expected rise in interest rates.

After a lukewarm December jobs report, signs of a pickup in inflation could come in the monthly consumer price report due on Friday, on the same day that the banking industry kicks off its fourth-quarter earnings season.

The S&P healthcare sector closed 1 percent higher, helped out by a 1.6-percent rise in Johnson & Johnson, a 5-percent gain in Gilead and a 8.3-percent increase in Boston Scientific shares.

Chip stocks dragged on the technology sector, which fell 0.3 percent. Intel fell 2.5 percent after Microsoft said computers with older Intel chips slowed noticeably after it released security patches.

Approximately 6.77 billion shares changed hands on the major domestic equity exchanges, a number that was above the 6.3 billion share average for the full session over the last 20 trading days.

Job Openings Fall

Job openings fell for a second straight month in November, with declines in the manufacturing and real estate sectors, supporting forecasts that job growth will slow in 2018.

The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday, also found that layoffs dropped to a six-month low, however, showing continued labor market strength.

Job openings, a measure of labor demand, fell by 46,000 openings to a seasonally adjusted 5.88 million, the lowest level since May. The job openings rate was 3.8 percent, a decline from October’s 3.9 percent.

Hiring dropped 104,000 to 5.49 million in November, and the hiring rate dipped to 3.7 percent from 3.8 percent. Economists expect job growth this year to slow to well below the 2017 monthly average of 170,000 as the labor market hits full employment.

The unemployment rate is at a 17-year low of 4.1 percent and economists expect it to drop to 3.5 percent by the end of 2018. Non-farm payrolls rose 148,000 in December.

“Like the recent readings on payrolls and initial claims, we see some moderation in the labor market data off of strong levels,” said Daniel Silver, an economist at JP Morgan in New York.

There were 378,000 job openings in manufacturing in November, down from 409,000 in October. The transportation, warehousing, and utilities sector saw a 60,000 drop in job openings. There was a 39,000 decline in job openings in the real estate and rental and leasing sector.

Job openings in the troubled retail sector increased by 88,000 jobs during November. The sector lost 67,000 jobs in 2017 as retailers, reeling from stiff competition from online sellers like Amazon, closed stores.

The JOLTS report also showed layoffs decreasing 7,000 to 1.67 million in November. That was the lowest level since May and marked five straight months of declines.

There was a slight drop in the number of people voluntarily quitting their jobs, leaving the quits rate unchanged at 2.2 percent for a third straight month. The Federal Reserve looks at the quits rate as a measure of job market confidence.