Bloomberg News

U.S. Stocks Advance as Services Data Offset Bank Declines

May 05, 2014

U.S. Stocks Decline on China Economy as Financial Shares Slump

Traders work on the floor of the New York Stock Exchange. Photographer: Spencer Platt/Getty Images

U.S. stocks rose, after benchmark indexes climbed to records last week, as an expansion in American service industries offset concern over growth in China and political tensions in Ukraine.

Apple Inc. climbed 1.4 percent to close above $600 for the first time since 2012. Biogen Idec Inc. and Gilead Sciences Inc. jumped at least 2.7 percent as biotechnology shares resumed their recovery from a two-month slide, leading gains in the Standard & Poor’s 500 Index. (SPX) JPMorgan Chase & Co. declined 2.5 percent after saying a trading slump has deepened, driving financial shares to the biggest retreat among 10 S&P 500 groups. Pfizer Inc. fell 2.6 percent on disappointing sales.

The S&P 500 added 0.2 percent to 1,884.66 at 4 p.m. in New York, rebounding after a drop of 0.8 percent at the start of trading. The Dow Jones Industrial Average (INDU) rose 17.66 points, or 0.1 percent, to 16,530.55. The Nasdaq Composite Index gained 0.3 percent. About 5 billion shares changed hands on American exchanges, the slowest trading in two weeks.

“We continue to remain choppy, going back and forth,” Joseph Tanious, a global market strategist at JPMorgan (JPM:US) Asset Management in Los Angeles, said by phone. His firm oversee $1.6 trillion in client assets. “The market is having a bit of identity crisis right now, searching for a direction. We are seeing opposing forces in the market.”

Investors pulled $2.66 billion last week out of exchange-traded funds that invest in U.S. equities, data compiled by Bloomberg show. Technology-focused ETFs saw withdrawals of $1.5 billion, the most among 12 sectors tracked by Bloomberg. Energy and utility funds attracted the biggest inflows, with deposits each totaling more than $400 million, the data show.

Record Levels

U.S. stocks rose last week, with the Dow average reaching an all-time high, as earnings topped forecasts and the Federal Reserve said it would further trim bond purchases as the economy gains momentum. The S&P 500 added 1 percent, taking its gain this year to 1.8 percent. The benchmark gauge briefly climbed above its highest closing price on May 2, as data showed U.S. payrolls rose the most since 2012.

The S&P 500 erased its early decline today after the Institute for Supply Management’s non-manufacturing index rose to 55.2 in April from the prior month’s 53.1. Readings above 50 indicate expansion. The median forecast of 69 economists surveyed by Bloomberg called for 54 in the gauge of services, which account for almost 90 percent of the economy.

Correction Risk

Ukraine sought to dislodge separatists from its eastern industrial heartland over the weekend as violence that’s spread to the Black Sea gateway of Odessa threatens to loosen Kiev’s control of the regions. Fighting in the eastern city of Kramatorsk left seven people dead, according to the website Kramatorsk.info. Clashes continued in Odessa yesterday.

China’s manufacturing contracted for a fourth month in April. HSBC Holdings Plc and Markit Economics said today their purchasing managers’ index rose to 48.1. That missed the median estimate of 48.4 and the preliminary reading of 48.3. Numbers below 50 indicate contraction.

“These geopolitical issues become widespread concerns,” Peter Sorrentino, a senior portfolio manager who helps manage about $3.8 billion at Huntington Funds in Cincinnati, said by phone. “Our view has been we’re going to get a transition that in effect we’ll quietly see a correction that takes place on the sector level, but not on the market level. If that doesn’t materialize, the market is very clearly, because of the slowdown we’re seeing in growth, vulnerable here that we could very easily see a correction.”

Corporate Earnings

Walt Disney Co., the world’s largest entertainment company, and Mosaic Co., the biggest U.S.-based potash producer, are among S&P 500 companies reporting results this week. Profit for members of the gauge probably climbed 4.6 percent in the first quarter from the year-earlier period, while sales rose 2.8 percent, according to estimates compiled by Bloomberg.

“Anybody that thinks American business is not doing well should just look at corporate profits,” Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., said at the company’s annual meeting on May 3.

Berkshire’s Class B shares slipped 1.2 percent to $126.61. The company reported a 3.8 percent decline in first-quarter profit as underwriting results dropped at insurance businesses and on reduced earnings from Buffett’s derivatives wagers.

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility known as the VIX, rose 2.9 percent to 13.29, for its first gain in six days. The measure has lost 3.1 percent this year.

Industry Returns

Utility, health-care and commodity shares climbed at least 0.5 percent for the best performances among S&P 500 main industries. Exxon Mobil Corp. added 0.9 percent to $102.91 while Chevron Corp. increased 0.5 percent to $125.36.

Apple advanced 1.4 percent to $600.96. The stock has jumped 15 percent since April 23, when the company reported a surge in iPhone sales and gave its shareholder payout program a $30 billion boost.

Biotech companies accounted for four of the 10 best performers in the S&P 500 as Biogen, Gilead, Vertex Pharmaceuticals Inc. and Alexion Pharmaceuticals Inc. each climbed at least 2.7 percent.

The Nasdaq Biotechnology Index advanced 1.8 percent, extending its gain from an April low to 8.2 percent. The gauge had tumbled as much as 21 percent from a February peak as investors exited the bull market’s biggest winners.

Monsanto Stake

Monsanto Co. climbed 2.4 percent to $114.85. Larry Robbins, founder of $7.5 billion Glenview Capital Management LLC, told Bloomberg Television’s Stephanie Ruhle at the 19th annual Sohn Investment Conference in New York that he’s amassed a $1 billion position in the seed maker and intends to hold it as a long-term investment as demand for genetically modified foods rises.

Sotheby’s advanced 3.2 percent to $44.80. The auction house agreed to appoint Third Point LLC founder Dan Loeb and two of his candidates to its board of directors, a settlement that ends a bitter proxy fight between the company and its largest shareholder.

PerkinElmer Inc. climbed 3.6 percent, the most in the S&P 500, to $43.95. The provider of equipment for genetic screening and drug research was raised to a buy from neutral at Janney Montgomery Scott LLC.

B/E Aerospace (BEAV:US) Inc. jumped 9.3 percent to $97.22. The maker of seats for commercial and business jets hired financial and legal advisers to study its options, including a sale, and canceled an investor meeting set for today.

Financial Retreat

Financial shares in the S&P 500 slumped 0.4 percent. JPMorgan declined 2.5 percent to $54.22. Fixed-income and equities trading revenue will drop about 20 percent from a year earlier at the New York-based company amid “a continued challenging environment and lower client activity levels,” JPMorgan said after the close of trading on May 2 in its quarterly regulatory filing.

Goldman Sachs Group Inc. fell 1.6 percent to $156.35 while Morgan Stanley slipped 2 percent to $30.07.

Pfizer retreated 2.6 percent to $29.96. The drugmaker reported first-quarter sales that missed analyst estimates as demand weakened for Lipitor and Viagra.

Separately, U.K. Business Secretary Vince Cable said yesterday that the U.S. company’s bid for Britain’s AstraZeneca Plc raised questions of “overriding national interest,” as the opposition Labour Party stepped up its opposition to the proposed takeover.

Target Corp. declined 3.5 percent to $59.87. Chief Executive Officer Gregg Steinhafel, dogged by questions over whether the company responded quickly enough to a data breach last year, will step down as chairman, president and CEO.

Tyson Foods Inc. dropped 9.9 percent to $38.44 for the biggest loss in the S&P 500. The largest U.S. meat producer reported a wider operating loss from the international unit for its fiscal second quarter as an outbreak of bird flu affected sales in China.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $60.34 USD
    • 0.04
    • 0.07%
  • BEAV
    (B/E Aerospace Inc)
    • $77.95 USD
    • 0.64
    • 0.82%
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