By Dan Strumpf
Stocks rebounded on Monday after a bigger-than-expected rise in
March retail sales offered a sign that economic growth was on
better footing following a difficult winter.
Investors, meanwhile, were encouraged by strong earnings from
banking giant Citigroup.
The Dow Jones Industrial Average gained climbed 128 points, or
0.8%, to 16155. The S&P 500 index gained 17 points, or 0.9%, to
1832. The Nasdaq Composite Index advanced 45 points, or 1.1%, to
4045.
Stocks got a boost after the Commerce Department reported that
retail sales rose 1.1% last month, the biggest monthly gain since
September 2012 and exceeding the 0.8% expected by economists.
Excluding auto sales, retail sales grew 0.7%, topping forecasts of
a 0.4% rise. The strong increase suggests that sales are bouncing
back after the cold winter kept many consumers at home earlier in
the year.
"Things are a little bit better on the earnings front and a
little bit better on the economic front," said Michael Arone, who
heads portfolio strategy at State Street Global Advisors, which
manages about $2.4 trillion. "Come off that spring thaw, we're
seeing some good numbers."
Many highflying stocks that have been hit hard in recent weeks
bounced back. The Nasdaq Biotechnology index gained 1.8% early in
the session, though it still remains down 7.3% in April following
heavy selling earlier in the month.
Facebook was up 1.1%, while Gilead Sciences rose 1.1%.
The early gain followed a sharp selloff last week, in which
continued weakness in previously hot biotechnology and
new-generation technology stocks put particular pressure on the
Nasdaq Composite Index.
That selling, in which the Nasdaq Composite suffered the biggest
weekly percentage loss last week since June 2012, started spilling
over into larger, blue-chip stocks. The Dow Industrials ended last
week with the biggest two-day decline in over two-months.
For the year, the Dow is down 2.7% after hitting an all-time
high at the end of last year. The S&P 500 index is down 1.1%,
while the Nasdaq is off 3.5%.
Despite the recent weakness, longer-term investors still believe
the outlook for stocks is favorable, as the fundamentals that have
helped push the market to new highs this year--such as an improving
economy, low interest rates and inflation and an accommodative
Federal Reserve--will eventually stem the selling.
Mr. Arone, who works with State Street's money managers in
deciding how to invest in stocks and other assets, said he
continues to recommend a bigger-than-usual holding of U.S. stocks.
In particular, he is advising investors to stick with corners of
the market that benefit from an improving economy, such as the
technology and consumer discretionary sectors.
"As the spring rolls into summer, we're expecting some positive
news on the earnings and economic front that we think will bolster
equity prices, " he said.
Wayne Kaufman, chief market analyst at New York-based investment
firm Rockwell Securities, said that while he remains bullish
long-term, he recommends investors hold off on putting new money to
work until the market shows it can respond to positive signals.
"Unfortunately, just because stocks stop going down doesn't mean
they are going up," Mr. Kaufman said.
The yield on the 10-year Treasury note ticked up to 2.642% from
a seven-week low of 2.619% late Friday.
Crude oil futures slipped 0.1% to $103.90 a barrel, after
settling at a seven-week low on Friday, while gold futures gained
0.6% to $1,326 an ounce. The dollar gained some ground against the
euro and the yen.
In corporate news, Citigroup shares rose 3% after reporting
first-quarter earnings and revenue that exceeded analyst estimates.
Shares have taken a hit in recent weeks after the financial firm
fell short of the Federal Reserve's test of its financial
health.
TIAA-CREF is set to announce it is buying Nuveen Investments for
$6.25 billion including debt, The Wall Street Journal reported. The
acquisition would move TIAA-CREF up to become one of the U.S.'s
biggest money managers.
WebMD Health surged 19% after the online health portal said it
expects first-quarter results will be at least at the high end of
expectations, helped recent improvement in sales activity.
European markets were broadly lower, as fresh tensions in
Ukraine added to the pressures of last week's technology-led
selloff. The Stoxx Europe 600 declined 0.1%, and was headed for the
lowest close in three weeks. Adding to concerns, Ukraine mobilized
its military over the weekend to counter pro-Russian militants who
extended their control across several cities in the east of the
country.
Comments from European Central Bank President Mario Draghi over
the weekend that the strength of the euro could prompt further
monetary easing to prevent inflation rate from falling too low had
little effect on the currency or equity markets.
Germany's DAX 30 index gave up 0.2%, France's CAC 40 reversed an
early loss to rise 0.1% and the U.K.'s FTSE 100 lost 0.1%.
Asian markets were mostly lower. Japan's Nikkei Stock Average
lost 0.4% to a six-month low, after suffering last week the biggest
weekly percentage decline since March 2011. China's Shanghai
Composite inched up 0.1%.
Write to Dan Strumpf at daniel.strumpf@wsj.com