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Investors nudge rally forward with modest gains

Traders work on the floor at the New York Stock Exchange in New York Tuesday.
Traders work on the floor at the New York Stock Exchange in New York Tuesday.
Seth Wenig, Associated Press

NEW YORK — Having sprinted higher for three weeks, the stock market is taking a break.

Investors made few big moves Tuesday after stocks rocketed 14 percent in just 16 days. The market put up modest gains as many traders held their positions and looked toward the Labor Department's employment report on Friday.

The Dow Jones industrial average rose 34 points. On Monday, the blue chips jumped 115 points and the Standard & Poor's 500 index nosed above 1,000 for the first time in nine months.

Tuesday's mostly upbeat economic data helped prevent the market's pause from turning into the type of slide that can follow big jumps. Analysts have been predicting stocks would idle after such a strong run, and some saw investor caution at work.

"There is a lot of concern that the market has moved too far too fast and that we've gotten ahead of the economy," said Brian Bush, director of equity research at Stephens Inc.

Despite the cautionary tone, investors did receive a few more doses of positive news — enough to keep them from giving up on the market. A rise in consumer spending last month and a fifth straight monthly increase in pending home sales provided new evidence that the economy could be stabilizing.

Corporate news also helped buoy sentiment. Caterpillar Inc. predicted that cost cuts and other efforts will enable it to post profits over the long term no matter how slowly the economy recovers. The world's largest maker of construction and mining equipment is considered a bellwether of the global economy. Its stock was the biggest gainer among the 30 stocks that make up the Dow.

According to preliminary calculations, the Dow rose 33.63, or 0.4 percent, to 9,320.19. The S&P 500 index rose 3.02, or 0.3 percent, to 1,005.65, while the Nasdaq composite index rose 2.70, or 0.1 percent, to 2,011.31. The gains left stocks at new highs for the year.

Meanwhile, traders are already looking to the Labor Department's report for July. It is often the most important economic reading each month and is drawing even more attention as investors look for clues about when perhaps the biggest drag on the economy will begin to ease.

Economists expect unemployment will increase but investors are looking for the pace of layoffs to slow so for the economy can start to heal.

"The second half of the week is going to be heavily dominated by the employment data," said John Canally, economist at LPL Financial. "That is keeping markets hesitant."