Wall St. flat but ekes out record; Europe shares up

NEW YORK Wed May 14, 2014 2:10am IST

1 of 6. Traders work on the floor of the New York Stock Exchange April 11, 2014.

Credit: Reuters/Brendan McDermid

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NEW YORK (Reuters) - U.S. stocks ended flat on Tuesday as the benchmark S&P 500 retreated after climbing over the 1,900 mark, while an index of European shares ended at a six-year high on solid corporate earnings and bets of more European Central Bank stimulus.

Unexpected weakness in U.S. retail sales boosted U.S. Treasury prices. The benchmark 10-year note was last up 13/32 in price to yield 2.61 percent, down from 2.66 percent late Monday. Bond yields have remained lower than anticipated as inflation remains weak and the growth picture remains murky.

The S&P 500 reached an intraday level of 1,902.17 before retreating from that level as the tepid U.S. retail sales data dampened hopes of a surge in economic growth in the second quarter. But the slight advance for equities helped the benchmark index set a record closing high for the tenth time this year.

"We didn't see much of a follow-through from yesterday's run-up. That started a discussion as to whether the economy was going to bounce back as strongly as some folks had been expecting," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

The Dow Jones industrial average .DJI rose 19.97 points or 0.12 percent, to end at 16,715.44, the S&P 500 .SPX gained 0.8 points or 0.04 percent, to 1,897.45 and the Nasdaq Composite .IXIC dropped 13.69 points or 0.33 percent, to 4,130.17.

Volume was light, with about 5.4 billion shares traded on U.S. exchanges, below the 6.11 billion average so far this month, according to data from BATS Global Markets.

EUROPE AND THE EURO

Sentiment in European equities was boosted by comments from two Bundesbank sources that the German central bank was prepared to support European Central Bank policy action, if needed, to shore up the region's economy. That hit the euro, which extended losses against the dollar.

The euro fell to a trough of $1.3688, its lowest since April 7, on the ECB speculation. It was down 0.4 percent on the day at $1.3702, also hurt after the German ZEW survey of investor sentiment fell short of expectations.

The ZEW survey contributed to views the ECB will ease monetary policy further next month.

"We see the euro trading with a downward bias given the market is expecting some kind of easing from the ECB next month. It is still not clear whether it will do quantitative easing, but a rate cut is more likely," said Yujiro Goto, currency strategist at Nomura.

The pan-European FTSEurofirst 300 .FTEU3 index of the region's biggest companies by market cap closed up 0.3 percent at 1,368.75, its highest level since May 2008, while Britain's FTSE .FTSE finished at a 14-1/2 year high.

The run of positive corporate news continued in Europe, with Germany's ThyssenKrupp (TKAG.DE) raising its full-year earnings outlook, while aerospace group Airbus Group (AIR.PA) reported better-than-expected profits and reaffirmed its financial goals for the year.

Oil prices continued their climb, as U.S. light crude oil settled up $1.11 at $101.70 a barrel, while Brent crude settled up 83 cents to $109.24.

(Additional reporting by Blaise Robinson, Anirban Nag and Caroline Valetkevitch; Editing by Bernadette Baum, Dan Grebler and Meredith Mazzilli)

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