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Stocks keep climbing even as manufacturing softens

NEW YORK (AP) — The stock market continued its climb Wednesday, despite a handful of disappointing economic reports.

It's a recurring theme in the stock market. While surprisingly bad news can still shake investors' nerves, they'll often shrug off reports of sluggish economic growth because it suggests that the Federal Reserve will keep pumping money into financial markets.

What's more, most investors have come to expect choppy economic growth, so they take mildly disappointing reports in stride, said Terry Sandven, chief equity strategist at U.S. Bank's wealth management group.

"It's a good backdrop for the market to trend higher," Sandven said.

The Dow Jones industrial average was up 42 points at 15,257, an increase of 0.3 percent, shortly before 2 p.m. Eastern Daylight Time.

The Standard & Poor's 500 index rose 7 points to 1,656, up 0.4 percent. Both the Dow and the S&P 500 closed at all-time highs on Tuesday.

News of slowing manufacturing in the U.S. and a widespread slowdown in Europe weighed on financial markets in early trading, but the stock market quickly recovered.

"Yes, we're at all-time highs, but valuations are still attractive," Sandven said. The S&P 500 is trading at 15 times earnings for 2013, in line with the historical average of the closely watched price-to-earnings ratio.

Tepid economic growth also keeps interest rates low, which encourages investors to buy dividend-paying stocks instead. More than four out of every 10 companies in the S&P 500 pay a higher yield in dividends than U.S. government bonds pay in interest, according to Sandven.

The Federal Reserve said Wednesday that U.S. factories cut back sharply on production in April, as automakers produced fewer cars and most other industries scaled back. Manufacturing output dropped 0.4 percent in April from March, the third drop in four months and the biggest since October.

In other trading, the Nasdaq composite rose four points to 3,466.

Nine of the 10 industry groups in the S&P 500 edged higher. Energy stocks were the exception, as falling oil prices tugged the group lower. The price of crude oil fell 20 cents to $94 a barrel.

Google crossed above $900 for the first time as the online search company opened its annual conference for software developers. The tech giant is expected to unveil new products and showcase the latest mobile devices running on its Android software. Google gained $18.56 to $905.66, an increase of 2 percent. Its stock is up 49 over the past year.

Macy's rose 3 percent, or $1.34, to $48.73 after posting a 20 percent rise in quarterly profit. The department-store chain also raised its quarterly dividend by a nickel to 25 cents and announced plans to buy an additional $1.5 billion of its own stock.

In the market for U.S. government bonds, the yield on the 10-year Treasury note slipped to 1.95 percent from 1.98 percent late Tuesday. Traders bought Treasurys, pushing yields down, partially in response to news of slower economic growth in Europe.

The Fed's bond-buying program has kept interest rates near historically low levels and encouraged investors to shift money into riskier assets, like stocks. The Fed buys $85 billion worth of bonds every month.

Among other companies in the news:

— Stock in Deere & Co. fell 4 percent. The maker of farm and construction equipment reported earnings that beat analysts' expectations, but it warned that cool spring temperatures and tepid demand for construction equipment will hinder sales growth this year. Deere's stock lost $4.34 to $89.43.

— Computer Sciences dropped 11 percent, the biggest loss in the S&P 500. The information technology company turned in much weaker revenue numbers than analysts had expected on Wednesday, as sales of the company's services to businesses and local governments slumped. Computer Sciences lost $5.52 to $43.97.

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