Bloomberg News

S&P 500 Rebounds as Internet Stocks Decline; Oil, Ruble Advance

May 07, 2014

Fed Chair Janet Yellen

Janet Yellen, chair of the U.S. Federal Reserve, arrives to a Joint Economic Committee hearing in Washington, D.C. on May 7, 2014. Photographer: Andrew Harrer/Bloomberg

The Standard & Poor’s 500 Index rebounded from yesterday’s loss even as Internet stocks led technology shares lower for a second day. Oil rose as U.S. crude inventories fell; Russian shares and the ruble rallied.

The S&P 500 increased 0.6 percent, while the Nasdaq Composite Index (CCMP) slipped 0.3 percent to extend yesterday’s 1.4 percent drop. West Texas Intermediate crude oil climbed 1.3 percent to $100.77 a barrel. The Micex Index of Russian stocks surged 3.4 percent for its biggest gain since March and the ruble strengthened 1.4 percent versus the dollar. Treasury notes were little changed.

Russian President Vladimir Putin said troops were pulled back from the Ukrainian border while in the U.S., Federal Reserve Chair Janet Yellen said the central bank must continue to spur the economy as indicators for inflation and employment remain far from policy makers’ goals. The retreat in Internet stocks came as Alibaba Group Holding Ltd. filed yesterday for what could be the largest U.S. initial public offering.

“Earnings season has been pretty good,” John Kvantas, a San Antonio, Texas-based director of equity research USAA Investments, said in a phone interview. The firm manages $62 billion. “If you get outside those momentum stocks, the market is not significantly overvalued. You still see very good companies with decent growth prospects that are not significantly overvalued.”

Internet Stocks

The S&P 500 fell 0.9 percent yesterday, and dropped as much as 0.4 percent today to below its average trading level for the past 50 days before rebounding. Financial shares paced gains today after disappointing results from American International Group Inc. dragged the group lower yesterday.

Technology companies in the S&P 500 lost 0.2 percent today after tumbling 1.2 percent yesterday. Yahoo! Inc. dropped 6.6 percent. Alibaba Group filed for what could become the largest U.S. IPO ever. Yahoo plans to sell part of its 22.6 percent stake in the Chinese online marketplace. Groupon Inc. lost 21 percent as its sales and profit projections for the current quarter trailed some estimates. Twitter sank 3.7 percent after leading a selloff in Internet shares yesterday with an 18 percent tumble.

AOL Inc. sank 21 percent as profit trailed estimates and FireEye Inc., which makes computer-security software, slid 23 percent as Citigroup Inc. cut its share-price estimate.

Whole Foods Market Inc. tumbled 19 percent for its biggest decline since 2006. The largest U.S. natural-goods grocer yesterday posted second-quarter profit that trailed analysts’ estimates as increasing competition from traditional supermarkets and other organic-food sellers eats into sales.

About 75 percent of companies in the S&P 500 that have posted results this season have beaten analysts’ earnings estimates and 52 percent have topped sales projections, data compiled by Bloomberg show. Some 22 S&P 500 companies, including Allergan Inc., Duke Energy Corp. and Prudential Financial Inc., report earnings today.

Fed Watch

U.S. equities climbed last week, sending the Dow Jones Industrial Average (INDU) to a record, after the Fed said the economy is gaining momentum as consumers spend more.

The central bank is winding down record stimulus as the world’s largest economy shows signs of rebounding from a first-quarter standstill. At the same time, the Fed repeated that it’s likely to keep the benchmark interest rate near zero for a “considerable time” after bond purchases end.

‘Remains Warranted’

“A high degree of monetary accommodation remains warranted,” Yellen said today in testimony prepared for delivery to the Joint Economic Committee of Congress. “Many Americans who want a job are still unemployed,” and inflation is below the central bank’s 2 percent target, she said.

The Treasury market yield curve steepened after Yellen tempered expectations for an acceleration of interest-rate increases. The difference in yields between five- and 30-year securities increased to about 175 basis points, or 1.75 percentage points, as investors bet moderate growth will prompt the central bank to stick with forecasts for increases next year. Benchmark 10-year notes were little changed as the U.S. sold $24 billion of the securities.

The Stoxx Europe 600 Index was little changed following an earlier drop after earnings from Societe Generale SA and Fiat SpA missed estimates. Ten of the 19 industry groups in the Stoxx 600 advanced.

Siemens AG climbed 2.1 percent as Europe’s biggest engineering company forecast an increase in productivity after saying it will buy some energy assets from Rolls Royce Holdings Plc and list its hearing-aid unit.

Commerzbank AG, Germany’s second-largest lender, slid 3.7 percent, while CGG SA, the surveyor of oilfields, sank 11 percent after their earnings missed analysts’ projections.

SocGen

Societe Generale, the second-biggest French bank by market value, reported a 13 percent decline in profit after writing down goodwill at its Russian unit. The stock slipped 0.8 percent.

Oil’s advanced help lead the S&P GSCI Index of commodities up 0.4 percent, even amid declines in 16 of the 24 materials it tracks.

The MSCI Emerging Markets Index was up 0.1 percent, recovering from an earlier 0.4 percent slide. South Korea’s Kospi lost 1 percent, with NCsoft Corp. leading declines by technology shares, and the won climbed to the highest level since 2008 versus the dollar as trading resumed following a four-day weekend.

The Shanghai Composite Index and the Hang Seng China Enterprises Index of mainland companies listed in Hong Kong both fell 0.9 percent. A services index from HSBC Holdings Plc and Markit Economics dropped to 51.4 in April from 51.9 in the previous month.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Michael P. Regan


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