U.S. stocks advanced, rebounding following the Standard & Poor’s 500 Index’s biggest drop since November 2011 after Federal Reserve Chairman Ben S. Bernanke said the central bank may phase out stimulus.
Consumer-staples, utility and health-care shares rose the most out of 10 S&P 500 groups, while technology and raw-material companies retreated. Procter & Gamble Co. and Coca-Cola Co. gained at least 1.6 percent, pacing advances among the largest U.S. companies. Oracle Corp. (ORCL:US) tumbled 9.3 percent after reporting a second straight quarter of sales that missed estimates.
The S&P 500 rose 0.3 percent to 1,592.43 in New York at 4 p.m., after fluctuating between gains and losses during the day. The Dow Jones Industrial Average gained 41.08 points, or 0.3 percent, to 14,799.40. About 10.7 billion shares traded hands on U.S. exchanges, the highest since October 2011, as futures and options contracts expire today in a process known as quadruple witching that can lead to unpredictable price swings.
“To me this is just a normal correction reacting to some unexpected news,” Laszlo Birinyi, president of Birinyi Associates Inc., said in an interview with Trish Regan and Tom Keene on Bloomberg Television’s “Street Smart.” “I still think you’re in a bull market.”
The S&P 500 sank 2.5 percent yesterday as global equities tumbled after the Fed indicated June 19 it may start paring stimulus measures as soon as September. The benchmark index has declined 4.6 percent since its May 21 high amid speculation the Fed will scale back quantitative easing. Central bank stimulus has helped fuel a rally in stocks worldwide and lifted the S&P 500 as much as 147 percent from its bear-market low in 2009.
The S&P 500 has rallied 149 days without a retreat exceeding 5 percent or more, data compiled by Bloomberg show. Last year, the index dropped 7.7 percent from a Sept. 14 peak through Nov. 15. The current streak has been the longest without a 5 percent drop since a 173-day stretch ended Feb. 20, 2007, about eight months before the financial crisis sent the market plunging 57 percent.
Economists have increased forecasts that the Fed will trim its monthly bond purchases to $65 billion in September and end buying in June 2014. In a Bloomberg survey of 54 economists conducted June 19-20, 44 percent saw a tapering in September, up from 27 percent in a June 4-5 survey.
Fed Bank of St. Louis President James Bullard today said the central bank had “inappropriately timed” its decision to lay out a plan to reduce the pace of bond purchases.
“A more prudent approach would be to wait for tangible signs that the economy was strengthening and that inflation was on a path to return toward target before making such an announcement,” Bullard said in a statement today.
The Chicago Board Options Exchange Volatility Index (VIX), the measure of options on the S&P 500 known as the VIX, fell 7.8 percent to 18.90. The gauge surged 23 percent to 20.49 yesterday, the highest on a closing basis since Dec. 28. The VIX has soared 67 percent since hitting a six-year low in March.
Consumer-staple, utility and health-care shares rose more than 0.9 percent today. Procter & Gamble added 2.9 percent to $77.43 for the biggest gain in the Dow. Coca-Cola climbed 1.6 percent to $39.76. Hewlett-Packard Co. fell 2.3 percent to $24.15 as technology stocks slumped the most out of 10 S&P 500 groups, losing 0.7 percent. Commodity producers erased 0.3 percent.
Facebook Inc. increased 2.6 percent to $24.53 after adding video to its Instagram photo-sharing service for smartphones, stepping up competition with microblogging site Twitter Inc. The new feature lets users capture, upload and share clips as long as 15 seconds, Kevin Systrom, Instagram’s co-founder, said at an event at Facebook’s headquarters in Menlo Park, California.
Equity Residential rallied 3.4 percent to $54.73. Real estate investment trusts with shorter-lease terms, like apartments, may be well-positioned for rising rates, Morgan Stanley analyst Haendel St. Juste wrote in a note.
Oracle lost 9.3 percent to $30.14. The world’s largest maker of database software reported fourth-quarter profit excluding some items of 87 cents a share on sales of $11 billion, missing analysts’ average estimate for profit of 87 cents on revenue of $11.1 billion, according to data compiled by Bloomberg.
The shares fell even as Oracle doubled its quarterly dividend, added $12 billion in buybacks and applied to list on the New York Stock Exchange.
Darden Restaurants Inc. sank 2.2 percent to $50.12. The operator of restaurant chains such as Olive Garden and Red Lobster said earnings in 2014 will be as much as 5 percent below 2013 profit.
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