By Dan Strumpf And Saumya Vaishampayan
U.S. stocks slipped Wednesday after Federal Reserve Chairwoman
Janet Yellen drew attention to elevated valuations in the stock
market.
The Dow Jones Industrial Average fell 37 points, or 0.2%, to
17891 in midmorning trading. The S&P 500 lost two points, or
0.1%, to 2087, and the Nasdaq Composite Index fell two points, or
0.1%, to 2087.
Stocks traded in a wide range, with the Dow falling as much as
147 points after remarks from Ms. Yellen about the risks of
"generally quite high" valuations in the stock market. The comments
came during a conversation with Christine Lagarde, managing
director of the International Monetary Fund.
But shares later rebounded off the day's nadir. Energy stocks
posted gains as oil prices rose to fresh five-month highs. Shares
of oil and gas companies gained 0.7% in the S&P 500. The jump
in oil prices came after data showed U.S. oil inventories fell last
week, snapping 16 weeks of rising supplies.
"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.
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.
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
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