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S&P upgrades US outlook, but investors yawn
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NEW YORK (AP) — The Standard & Poor's ratings agency said Monday it's getting more optimistic about the U.S. economy. But investors just yawned.

The U.S. stock market edged higher in early trading after the S&P agency raised its outlook for U.S. government debt and predicted an improving economy, but the gains were slim and fickle.

In the first hour of trading, stock indexes edged higher, fell, then edged higher again. By midday Eastern Daylight Time they were still higher, but only slightly.

The gains were broad, but modest. Seven of the 10 industry groups in the S&P 500 index rose, led by telecommunications stocks with an increase of 0.8 percent. Among individual stocks, McDonald's rose after reporting higher sales thanks to new menu items.

The importance of S&P's opinion on the U.S. economy harkens back to August 2011, when the S&P Ratings Service downgraded the U.S. government's long-term credit rating because of a contentious fight in Congress over raising government spending limits. The downgrade, an embarrassment to the U.S., also sent the stock market into a tailspin. The Dow Jones industrial average plunged 634 points, or more than 5 percent, on the first trading day after the downgrade. The market suffered through big triple-digit swings for the rest of the fall.

On Monday, S&P upgraded its outlook on the U.S. debt rating to "Stable" from "Negative," citing "the strengths of the U.S. economy," including the Federal Reserve's willingness to support growth by keeping interest rates low and buying bonds. The program is aimed at encouraging borrowing, spending, and investing in stocks. S&P also noted approvingly that Congress had agreed to raise some taxes this year, notably the Social Security tax that most workers pay, which has helped shrink the government's budget deficit.

But the reaction from investors Monday hardly mimicked their reaction two summers ago. Some doubted the S&P's assessment that the economy is improving, and said that the Fed is only artificially propping it up. Others agreed with the S&P's assessment, but said it was old news.

Ed Butowsky, managing partner of Chapwood Investments in Dallas, said that the unemployment rate is still too high, economic growth too weak and the government's budget deficit still too heavy for the economy to be considered healthy.

"It defies economic logic as to why the S&P did this," Butowsky said. "...We continue to print money, we continue to spend money. What are they looking at?"

Jerry Webman, chief economist at OppenheimerFunds in New York, thinks the economy is strong enough to drive sustainable earnings growth, but not so strong that the Fed might pull the plug on its stimulus measures. Still, he thinks investors shouldn't draw too many conclusions from a single S&P report.

"On the question of what's moving the U.S. stock market," Webman said, "the answer is 'Not much.'"

On a day short on U.S. economic news, the S&P upgrade was the center of traders' attention. There were no major government reports on the U.S. economy, and no big companies announced earnings.

Shortly before noon, the Dow was up 22 points at 15,271. The S&P 500 index was up three to 1,647. The Nasdaq composite index was up 14 to 3,483.

The yield on the 10-year Treasury note edged up to 2.21 percent from 2.18 percent late Friday, a sign that investors were more willing to put their money in the stock market. In commodities trading, the price of crude oil fell 28 cents to $95.75 and gold edged up 30 cents to $1,383 an ounce.

Outside the U.S., Japan's Nikkei stock index soared 5 percent after a report that the world's No. 3 economy is growing faster than expected. But there were also reminders that the global economy is far from cured. In the Netherlands, the central bank warned that the government needs to cut spending. Courts in Germany are poised to consider whether Germany is legally allowed to bail out struggling European countries as it's been doing.

Among companies making big moves:

—Information company IHS Inc. rose after announcing it would buy R.L. Polk & Co., the owner of the Carfax service that compiles history reports on vehicles. IHS rose $1.34, or about 1 percent, to $108.28.

—McDonald's rose after reporting that sales were up at stores open at least a year, helped by the company's focus on the Dollar Menu and other low-cost menu items. McDonald's rose $1.66 to $99.94.

—B&G Foods, which makes foods under brands including Cream of Wheat and Mrs. Dash, jumped after announcing it would buy Robert's American Gourmet Food, whose brands include Smart Puffs. B&G Foods jumped $1.95, or nearly 7 percent, to $31.13.