By Corrie Driebusch And Saumya Vaishampayan
U.S. stocks traded slightly lower Friday, but were still on
track to post their biggest monthly percentage gains since
2011.
The Dow Jones Industrial Average fell 32 points, or 0.2%, to
18182. The S&P 500 slipped 1.5 points, or 0.1%, to 2109 and the
Nasdaq Composite declined 17 points to 4971.
The Nasdaq is within striking distance of hitting 5000, a level
last touched nearly 15 years ago. On Thursday, the Nasdaq advanced
0.4% to 4987.89, ending just 1.2% below its record close of 5048.62
set in March 2000. Other benchmark indexes slipped, with the Dow
falling 0.1% to 18214.42. The S&P fell 0.1% to 2110.74.
"There's more applauding going on for U.S. stocks and there's
more excitement building up around the market," said Tony Scherrer,
director of research at Smead Capital Management, which manages
roughly $1.3 billion, referring to the February rally in U.S.
equities.
This excitement can be seen playing out particularly in the
Nasdaq, though Mr. Scherrer said he is wary of some of the names
leading the index higher.
"Some of the young tech, the conceptual tech kind of stocks, we
think they're getting rewarded with too high of multiples, and that
there's too much excitement around them," he said, adding that his
firm prefers some "old tech" names based on lower price-to-earnings
valuations and strong cash flows.
In economic news, the Commerce Department said Friday that U.S.
gross domestic product expanded at a 2.2% annual rate in the fourth
quarter, down from an initial estimate of 2.6%. Economists surveyed
by The Wall Street Journal had expected an advance of 2%.
The report showed that the economy's recent fast pace of
economic growth was unsustainable. The economy expanded at a 5%
pace in the third quarter.
Separately, the Chicago Business Barometer fell to its lowest
point since July 2009, declining to 45.8 in February from January's
59.4. The decline indicates that business activity is
contracting.
Even with the muted movement in stocks on Friday, both the Dow
industrials and the S&P 500 are on track for their biggest
monthly percentage gains since October 2011. The rise marks a
rebound from a volatile January that closed with sharp declines.
The Dow has increased 6.1% and the S&P 500 has advanced 5.8% in
February, through Thursday's close. The Nasdaq has risen 7.6% in
the same period. All three indexes were down in January.
"The data over the last two months has been more mixed on a
macroeconomic front, but as stock investors you're not thriving off
of GDP numbers," said Steven Freedman, head of cross-asset strategy
at UBS Wealth Management Americas, which manages roughly $1
trillion. "Earnings ultimately are what matters."
With 485 companies in the S&P 500 reporting results, the
blended earnings growth rate for the fourth quarter of 2014 is
3.7%, more than the estimate of 1.7% at the end of the fourth
quarter, according to FactSet.
Investors say in addition to strong earnings from technology and
retail companies, a stabilization in oil prices as well as
diminished international risks, namely concerns about a Greek exit
from the eurozone, have helped stocks rally in February.
And the types of stocks that are leading indexes higher show
that investors are confident about further stock-market gains, said
Peter Kenny, chief market strategist at Clearpool Group.
S&P 500 consumer discretionary and technology stocks are on
track to notch the biggest gains for the month. Utilities stocks,
known as bond proxies because they pay out big dividends, have
tumbled the most this month. The gains in tech stocks, demonstrated
by the tech-heavy Nasdaq's performance this month, show "investor
appetite for growth-oriented equity investments," said Mr. Kenny.
"That's a big deal...and speaks to investor confidence," he
added.
In Europe, Germany's DAX rose 0.7% and France's CAC 40 climbed
0.8%.
In other markets, gold futures rose 0.2% to $1212.50 an ounce.
Crude-oil futures added 1.1% to $48.68 a barrel.
Action was muted in the Treasury market. The yield on the
10-year note slipped to 2.010% from 2.016% on Thursday. Yields rise
as prices fall.
In corporate news, J.C. Penney Co.'s stock tumbled 5.4% after
the retailer reported a surprise loss for the fourth quarter.
Weight Watchers International Inc. swung to a loss in the fourth
quarter as the company continued to lose members. The weight-loss
company's shares fell 33%.
Ross Stores Inc. shares rose 6% after the retailer reported
sales and earnings well above its expectations.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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