US STOCKS-Wall St gains as small-cap Russell 2000 hits record


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    * 10-year Treasury yield tops 3.1 percent
    * Macy's earnings beat boosts retail sector
    * North Korea threatens withdrawal from summit
    * 3M weighs on Dow following brokerage downgrade
    * Indexes up: Dow 0.25 pct, S&P 0.41 pct, Nasdaq 0.63 pct

 (Updates to market close)
    By Stephen Culp
    May 16 (Reuters) - Retail and technology stocks led Wall
Street higher on Wednesday and the small-cap Russell 2000 hit a
record peak, even as a rise in U.S. bond yields to an almost
seven-year high suggested more competition for equities and
investors fretted over geopolitics.
    Smaller companies continued this year's trend of
outperforming their larger rivals with the Russell 2000  .RUT 
reaching a record high. The index ended up 1 percent.
    "Small caps present a cleaner play than large caps on two
fundamental market drivers: lower corporate taxes and a stronger
US economy," research firm DataTrek wrote in its morning
    Macy's Inc  M.N  shares advanced 10.8 percent after the
department store operator reported results that beat analyst
estimates and the company raised its profit outlook.*:nL3N1SN4PD
    The results also boosted shares of rival department stores
J.C. Penney Co Inc  JCP.N , Kohl's Corp  KSS.N , Nordstrom Inc
 JWN.N  and Target Corp  TGT.N . The S&P 500 Department Store
index  .SPLRCRETD  gained 5.2 percent, its largest daily jump in
nearly six months.
    "I think corporate earnings have been remarkably strong,"
said David Carter, chief investment officer at Lenox Wealth
Advisors in New York. "The concern is really more about the
future and decelerating growth." 
    Macy's earnings pushed the consumer discretionary sector
higher, a day after government data showing an acceleration of
consumer spending fanned inflation concerns and helped send U.S.
government bond yields higher.
    Yields on 10-year U.S. Treasuries hit 3.10 percent for the
first time since July 2011, continuing to pressure stocks as
investors consider whether U.S. government bonds pose a more
attractive option to riskier equities.
    "As yields go up, they start to be a little bit more
competitive with risk assets and with stocks in particular,"
said Katie Nixon, chief investment officer for the wealth
management division of Northern Trust in Chicago.
    Weeks of diplomatic progress were thrown into doubt when
North Korea postponed high-level talks with Seoul and threatened
to pull out of its historic meeting with the United States.*:nL3N1SN1QK
    The uncertainty compounded investor jitters ahead of United
States-China trade negotiations.
    "The general consensus seems to be we'll come to some sort
of trade agreement," Carter said. "But it may be choppy until we
get there." 
    The Dow Jones Industrial Average  .DJI  rose 62.52 points,
or 0.25 percent, to 24,768.93, the S&P 500  .SPX  gained 11.01
points, or 0.41 percent, to 2,722.46, and the Nasdaq Composite
 .IXIC  added 46.67 points, or 0.63 percent, to 7,398.30.
    Of the 11 major sectors of the S&P 500, only rate-sensitive
utilities  .SPLRCU  and real estate  .SPLRCR  stocks closed in
negative territory.
    The tech sector  .SPLRCT  rose 0.4 percent, and gave the S&P
500 its biggest boost among the major sectors. 
    Micron Technology Inc  MU.O  rose 4.6 percent after RBC
Capital Markets initiated coverage of the chipmaker with an
"outperform" rating. The Philadelphia SE semiconductor index
 .SOX  was up 1.4 percent.
    Facebook Inc  FB.O  shares were the biggest drag on the S&P
500, closing down 0.6 percent, on news that Chief Executive Mark
Zuckerberg would appear before members of the European
Parliament to answer questions about the improper use of users'
    3M Co  MMM.N  weighed the most on the Dow, slipping 1.1
percent after Jefferies downgraded the stock to "hold."
    Advancing issues outnumbered declining ones on the NYSE by a
1.92-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.
    The S&P 500 posted 15 new 52-week highs and three new lows;
the Nasdaq Composite recorded 128 new highs and 48 new lows.  
    Volume on U.S. exchanges was 6.22 billion shares, compared
to the 6.66 billion average for the full session over the last
20 trading days.

 (Reporting by Stephen Culp
Additional reporting by Lewis Krauskopf
Editing by Leslie Adler)
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