By Corrie Driebusch
U.S. stocks rose Friday, bouncing back from the previous
session's steep declines.
The Dow Jones Industrial Average added 121 points, or 0.7%, to
17962. The S&P 500 index gained 15 points, or 0.7%, to 2100 and
the Nasdaq Composite Index climbed 36 points, or 0.7%, to 4977.
Even with the day's gains, stocks are poised to be in the red
for the week, in large part due to Thursday's sharp selloff. The
latest hiccup for the equities market was sparked by mixed economic
data that underscored worries about slowing U.S. economic growth, a
common theme for 2015. The companies whose shares fell the most
Thursday were those that had previously performed well, such as
biotechnology and small-capitalization companies.
"With valuation in the upper end of normal and earnings
struggling a bit this year, I think the start of 2015 has shown
it's going to be a little bit more difficult to make a buck in U.S.
equities this year," said Jeff Layman, chief investment officer of
BKD Wealth Advisors, which manages about $3 billion. The S&P
500 is trading at 17.4 times the past 12 months' earnings,
according to FactSet. That is above its 10-year average of
14.6.
First-quarter earnings have been coming in better than feared.
With 360 companies in the S&P 500 having reported earnings,
first-quarter profits are on track to decline 0.4% from a year ago,
according to FactSet. Analysts had predicted a 4.7% decline in
profits ahead of earnings season, in large part because of worries
about a stronger dollar and lower oil prices.
So far this year, U.S. stocks performance has been choppy. But
even as stocks have seen daily swings, the market has remained
range-bound. Through Thursday's close, the Dow is roughly flat for
the year, and the S&P 500 is up 1.3%.
"The last four months have been quite a roller coaster," said
Richard Yoken, founder of the Portfolio Strategy Group, a White
Plains, N.Y.-based wealth management firm that manages roughly $1.3
billion, referring to the ups and downs of the stock market. If
clients call to ask about a 150-point fall in the market, Mr. Yoken
said he would tell them not to worry, since the Dow would probably
be back up 150 points the next day.
He said first-quarter earnings so far have been as he
anticipated. The wild card for investors, he said, is when the
Federal Reserve will start to raise short-term rates, but even that
shouldn't cause big stock swings. "This is the most telegraphed
potential increase the Federal Reserve has ever had," he said.
"With regard to how the market will react, it should be priced in
already."
On Wednesday, a statement from the Federal Reserve signaled that
interest-rate increases are still possible in the coming months,
though it gave few new clues about the specific timing for an
increase. Following the financial crisis, the Fed cut its benchmark
interest rate to virtually zero to jump-start the economy. After
more than six years, the Fed is widely expected to raise short-term
rates later this year.
Modestly positive economic data out of Asia helped lift U.S.
stocks on Friday, said John Brady, managing director at futures
brokerage R.J. O'Brien.
According to government data, inflation in Japan rose for the
first time in almost a year in March and data out of China showed
signs of modest growth in the manufacturing and services
sectors.
"It suggests within the Chinese economy both the service and the
manufacturing markets are still expanding," Mr. Brady said.
In earnings news, LinkedIn Corp.'s shares tumbled 21% after the
professional social network sharply lowered its forecast for the
year, citing a stronger dollar and weaker demand for traditional
advertising.
Chevron Corp. said profit fell 43% in the first quarter amid
tumbling oil prices, though results topped expectations as profit
from its refining segment doubled. Shares still fell 2.2%.
Gilead Sciences Inc.'s profit soared thanks to sales of its two
key hepatitis C drugs. For the year, the company also raised its
guidance for net product sales by $2 billion. Shares rose 5.4%.
Expedia Inc. said its first-quarter revenue grew more than
expected amid strong growth at its namesake and Hotels.com brands.
Shares gained 8%.
In Europe, U.K. stocks edged up in light trading, with the FTSE
100 adding 0.4%. Most European stock markets were closed Friday in
observance of the May Day holiday.
In commodity markets, gold futures declined 0.8% to $1173.40 an
ounce. Crude-oil futures slipped 1.6% to $58.68 a barrel.
U.S. Treasury bonds pulled back Friday. The yield on the 10-year
Treasury note rose to 2.120% from 2.046% on Thursday.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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