By Daniel Huang
U.S. stocks ended slightly higher Wednesday as investors looked
for signs that the market can stabilize after its recent swoon.
Stocks had started the U.S. trading day under pressure following
widespread declines in Europe amid growing concerns about the
strength of the euro-zone economy. But healthy corporate earnings
and a belief that the U.S. economy is on a moderate growth path
have investors thinking declines in eight out the last 10 trading
sessions will ultimately prove short-lived.
The Dow Jones Industrial Average rose 13.87 points, or 0.08%, to
16443.34. The S&P 500 index inched up 0.03 point to 1920.24 and
the Nasdaq Composite Index advanced 2.22 points, or 0.05%, to
4355.05.
Viren Chandrasoma, managing director in equity trading at Credit
Suisse, said that after an extended period of quiet, the pullback
was bound to spook some investors. However, he said the swoon
wasn't indicative of broader trouble for U.S. stocks.
"Every time you see some selling, the market bounces right back
with a surge of buying," Mr. Chandrasoma said. "Plenty of people
are looking to employ cash at these lower levels."
While geopolitical tensions, particularly in Russia and Ukraine,
weigh on investor sentiment in Europe, U.S. investors pointed to a
strengthening U.S. economy as a reason to buy stocks. Also helping
boost appetite for stocks has been a relatively strong
second-quarter earnings season and low interest rates.
"Corporate earnings are continuing to come in strong," said Doug
Cote, chief market strategist at Voya Investment Management. "At
the end of the day, we are still in a bull market."
Shares of Molson Coors Brewing Co. rallied 5.8%, making the
stock the top gainer in the S&P 500. The company said its
second-quarter profit increased 8.8% as higher pricing helped boost
sales.
"Any time you get a geopolitical headline, it tends to dominate
trading for 24 hours," said J.J. Kinahan, chief strategist at TD
Ameritrade. "As soon as it blows over, you get back to what's
really driving the market."
U.S. stocks slid on Tuesday, with the Dow industrials posting
their fourth loss in five sessions, amid heightened tensions
between Russia and Ukraine.
On Wednesday, some investors were buying as they exited
positions made to protect against declines, known as hedges, said
Jeff Yu, head of single-stock derivatives trading at UBS AG. He
said that Tuesday's dive was likely a result of investors making
those types of bets, since the steepest losses were in large-cap
stocks, which are typically easier to trade than small-cap stocks
and high-yield debt, which have both been under pressure
recently.
Gains in U.S. stocks were a contrast to a selloff in Europe that
saw the Stoxx Europe 600 index close with a 0.9% decline. Data
showed that Italy slipped back into recession and German
manufacturing orders surprisingly tanked in June, deepening fears
that the euro zone's economic recovery is stalling. Germany's
economy ministry said concerns about geopolitics probably held back
orders.
"There is a battle between traders focused on non-U.S. economic
pains and a positive U.S. economic narrative that is increasingly
compelling," said Peter Kenny, chief market strategist at Clearpool
Group.
Mr. Kenny pointed to strong earnings and signs of a robust U.S.
economy as fundamental factors propping up the market. The Commerce
Department reported Wednesday that the U.S. trade deficit narrowed
more than expected in June, likely boosting measures of
second-quarter economic growth.
"For U.S. investors investing in U.S. equities, the long list of
improving economic data is the more powerful theme," he said.
In corporate news, Sprint Corp. shares dropped 19%. The wireless
carrier decided Tuesday to abandon its pursuit of T-Mobile US Inc.
and replace its chief executive.
21st Century Fox withdrew its bid to buy Time Warner Inc.,
pushing shares up 3.3%, while Time Warner shares fell 12.9%. Time
Warner also reported better-than-expected earnings in the
second-quarter.
Walgreen Co. said it would buy the remaining 55% of
Switzerland-based Alliance Boots GmbH it doesn't already own and
confirmed it would maintain its U.S. headquarters after the merger
instead of pursuing a so-called tax inversion. Shares fell
14.3%.
Groupon Inc. shares declined 12.7% after posting a loss that
widened in the second quarter and issued disappointing guidance for
the current quarter.
The yield on the 10-year Treasury note, which moves inversely to
its price, briefly dipped to an intraday low of 2.44%, according to
FactSet, matching the lowest yield so far this year, before ending
at 2.47%.
Gold futures rose 1.7% to $1,307.70 an ounce, while crude-oil
futures fell 0.3% to $97.05 a barrel.
Write to Daniel Huang at daniel.huang3@wsj.com