By Dan Strumpf And Saumya Vaishampayan
U.S. stocks extended losses Wednesday after Federal Reserve
Chairwoman Janet Yellen drew attention to elevated valuations in
the stock market.
The Dow Jones Industrial Average fell 110 points, or 0.6%, to
17817. The S&P 500 lost eight points, or 0.4%, to 2082. The
Nasdaq Composite Index declined 21 points, or 0.4%, to 4919.
Traders attributed the declines--which steepened through
midmorning--to remarks from Ms. Yellen about the risks of
"generally quite high" valuations in the stock market. The remarks
came during a conversation with Christine Lagarde, managing
director of the International Monetary Fund.
Above-average stock valuations have long been a concern for
investors, following several years of gains in stocks. The S&P
500 index currently trades at 17.5 times the last 12 months of
earnings, according to FactSet. Over the last 10 years, the index
has traded at an average of 15.8 times earnings.
Technology stocks posted the sharpest losses, down 0.7% in the
S&P 500. Shares of Dow component Microsoft Corp. fell 1.3%.
But shares of energy companies remained in positive territory as
U.S. crude prices rose to their highest level since December.
Shares of Exxon Mobil Corp. and Chevron Corp. climbed 0.3%.
Crude-oil futures rose 2.6% to $61.99 a barrel. Oil prices have
surged more than 42% from their 2015 low of $43.46 reached in
March.
"Oil prices have shot up pretty quickly," said David O'Malley,
chief executive of Penn Mutual Asset Management, which has $20
billion under management. "This increase back to $60 a barrel
alleviates some of the fears" about what low oil prices could mean
for the fracking industry and more levered energy companies, he
added.
Meanwhile, investors received Wednesday a disappointing report
on private-sector employment. Private payrolls in the U.S.
increased by 169,000 in April, according to a report compiled by
payroll processor Automatic Data Processing Inc. and forecasting
firm Moody's Analytics. Economists surveyed by The Wall Street
Journal had expected an increase of 205,000 jobs.
Stocks fell Tuesday, with the Dow pulling back 0.8% to 17928.20.
The S&P 500 declined 1.2% to 2089.46, giving up most of its
gains from a two-day winning streak ended Monday. For the year, the
Dow is up just 0.6% and the S&P has gained 1.5%, through
Tuesday's close.
Investors continued to watch first-quarter earnings. Chesapeake
Energy Corp. said Wednesday it swung to a loss in the first quarter
as the shale driller took a $3.6 billion write-down. Excluding the
impairment and other special charges, profit came in above
expectations. Shares fell 2.4%.
Mylan NV said Tuesday its revenue rose a less-than-expected 9%,
as foreign currency and acquisition costs weighed on results. The
company affirmed its full-year outlook. Shares fell 0.9%.
Alexion Pharmaceuticals Inc. has agreed to buy Synageva
BioPharma Corp. in a cash-and-stock deal valued at $8.4 billion.
Alexion shares fell 9%, while those of Synageva surged 115%.
Write to Dan Strumpf at daniel.strumpf@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
Access Investor Kit for Alexion Pharmaceuticals, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0153511094
Access Investor Kit for Chevron Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1667641005
Access Investor Kit for The Dow Chemical Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US2605431038
Access Investor Kit for Exxon Mobil Corporation
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US30231G1022
Access Investor Kit for Synageva BioPharma Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US87159A1034