U.S. Stocks Rise as Tech Stocks Rebound Amid Earnings

April 15, 2014

Chicago (Apr 15)   U.S. stocks rose a second day, after equities posted the worst week since 2012, as earnings from Coca-Cola Co. and Johnson & Johnson overwhelmed concerns that tensions in Ukraine are worsening.

The Nasdaq Composite Index gained 0.3 percent, erasing an earlier drop of 1.9 percent after nearing its average price in the past 200 days. Coca-Cola gained 3.7 percent as global volume sales increased. Johnson & Johnson climbed 2.1 percent as the company raised its forecast for the year.

The Standard & Poor’s 500 Index climbed 0.7 percent 1,842.98 at 4 p.m. in New York, reversing a loss of 0.8 percent. The Dow Jones Industrial Average gained 89.32 points, or 0.6 percent, to 16,262.05. About 7.7 billion shares changed hands on U.S. exchanges, 10 percent above the three-month average.

“Stocks are having meaningful moves in both directions because people are nervous on both sides,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Subjectivity plays such a pivotal role, and emotions, in what’s been going on in this market that it’s hard to pinpoint what causes a turn in the direction.”

The S&P 500 yesterday briefly erased a 1 percent gain, as technology shares dipped, before closing higher to halt a two-day slide. The index has dropped 2.5 percent from its April 2 record as selling from Internet and biotechnology stocks, the best performers in a five-year rally, spread to the broader market.

Technology Volatility

The Nasdaq Composite today fell to within four points of its 200-day moving average of 3,942.50 before reversing. The last time the gauge dropped below that level, considered an important threshold by technical analysts, was Dec. 31, 2012.

The Nasdaq, along with the S&P 500, Dow and Russell 2000 indexes, fell below 10-day through 100-day averages last week. The Russell index of smaller companies sank through its 200-day average today before reversing to close about 12 points above that level.

The volatility in technology stocks “adds to investor uneasiness,” Brian Peery, who helps oversee $4.8 billion for Novato, California-based Hennessy Funds, said in a phone interview. Peery said his firm has taken advantage of the recent selloff to add holdings in industrial companies, such as airlines. “The market is going to continue to climb the proverbial wall of worry. There is enough good economic news to support the market moving up higher in slower stages.”

Data Watch

Economic data today showed manufacturing in the New York region grew at a slower pace in April while the cost of living in the U.S. rose more than projected in March as food and rents became more expensive.

Confidence among U.S. homebuilders rose less than forecast in April, as sales and prospective buyer traffic stagnated, showing the residential real estate market struggled to improve after a harsh winter. An S&P index of homebuilders fell 0.6 percent.

“The discipline is to take long-term views of data and move away from the wiggles of each daily number,” Stephen Wood, the New York-based chief market strategist at Russell Investments, which oversees more than $259 billion, said by phone. “The grinding, if reluctant, U.S. economy is still in place and all of this data, in the long-term perspective, confirms that.”

Investors are also weighing data from China, where a report earlier today indicated the money supply grew less than forecast in March. The government will report tomorrow gross domestic product data for the first quarter in the world’s second-largest economy.

China GDP

“China’s growth data tomorrow may demonstrate a weaker-than-expected economy,” Ronald Wan, chief China adviser at Asian Capital Holdings Ltd., said by phone from Hong Kong. “Expectations for large-scale stimulus may not be in place and there could be smaller measures instead.”

Ukraine unleashed an offensive to dislodge militants from towns in its eastern Donetsk region as the authorities in Kiev said elements of Russian special forces were identified among the anti-government forces. Russia’s prime minister said the country risks civil war.

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