The Dow notched a seventh straight day of gains on Tuesday, but light volume suggested that investors don't believe the more than five-month rally has the legs to keep going.
Surprisingly strong sales by McDonald's boosted optimism on consumer spending and drove the Dow's gains on what turned out to be the quietest day of trading so far in 2011, with total volume about 17 percent below last year's daily average.
The light volume, textbook wise, tells you this market is running on fumes, said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. But that doesn't mean it can't continue.
Weakness in energy shares limited gains in the S&P 500 and Nasdaq after China, the world's second-biggest energy consumer, raised interest rates for the second time in six weeks. The move pressured commodities on fears of lower demand but had little market impact outside that sector.
The rate hike is important, but it isn't at a critical level where it becomes troublesome, said Michael Mullaney, a portfolio manager who helps manage $9.5 billion at Fiduciary Trust Co in Boston.
McDonald's had a really great number and is a sign that consumer spending is rebounding, Mullaney added, noting that his fund owns the stock.
The Dow Jones industrial average <.DJI> was up 71.52 points, or 0.59 percent, at 12,233.15. The Standard & Poor's 500 Index <.SPX> was up 5.52 points, or 0.42 percent, at 1,324.57. The Nasdaq Composite Index <.IXIC> was up 13.06 points, or 0.47 percent, at 2,797.05.
Just 6.99 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 8.47 billion.
In extended trading, Dow component Walt Disney Co
The S&P energy sector <.GSPE> was by far the weakest S&P sector, down 0.5 percent. U.S. crude for March delivery settled down 0.6 percent.
Merger activity continued for a second straight day with Kindred Healthcare Inc's
Kindred Healthcare jumped 28.3 percent to $25.00 and RehabCare soared 45.5 percent to $37.05.
On the downside, U.S.-listed shares of generic drugmaker Teva Pharmaceutical Industries'
Avon Products Inc
(Editing by Leslie Adler)