U.S. stocks erased losses as technology and energy shares rebounded from earlier declines sparked by data showing the world’s largest economy grew less than economists forecast.
Apple Inc. and Hewlett-Packard Co. jumped at least 2.3% to pace a recovery in technology companies. J.C. Penney Co. climbed 14% as billionaire investor George Soros disclosed a passive stake in the retailer. Homebuilders added for a sixth straight day. Amazon.com Inc. slid 6.5% after saying it may post an operating loss in the second quarter. Starbucks Corp. dropped 0.5% as it reported sales that trailed analysts’ estimates.
The S&P 500 rose less than 0.1% to 1,585.47 at 3:38 p.m. in New York, erasing an earlier drop of as much as 0.5%. The Dow Jones Industrial Average increased 40.81 points, or 0.3%, to 14,741.61. Trading in S&P 500 stocks was 6.3% below the 30-day average at this time of day.
“Investors are tiptoeing into the waters and trying to figure out whether it’s too hot or too cold,” Frederic Dickson, who helps manage $32 billion as chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said by telephone. “The GDP number was disappointing, and we approach recent record highs, investors are a little more cautious, but we’re still winding up a fairly good week in equities.”
Gross domestic product rose at a 2.5% annual rate in the first quarter, lower than forecast, after a 0.4% fourth-quarter advance, Commerce Department figures showed today in Washington. The median estimate of 86 economists surveyed by Bloomberg called for a 3% gain. Consumer spending, the biggest part of the economy, climbed by the most since the fourth quarter of 2010.
Consumer Confidence
A separate report showed confidence among consumers fell in April to a three-month low as Americans grew more pessimistic about the outlook for the economy. The Thomson Reuters/University of Michigan final index of consumer sentiment slid less than forecast, to 76.4 from 78.6 a month earlier. The median projection in a Bloomberg survey was 73.5.
The S&P 500 rose 0.4% yesterday, extending its gains since April 18 to 2.8%, as companies reported earnings that beat estimates. The benchmark equity gauge has surged 134% from a 12-year low in 2009 as corporate earnings topped forecasts and the Federal Reserve embarked on three rounds of bond purchases to spur economic growth. The S&P 500 is up 2% this week, heading for a monthly gain of 1%.
Fed Stimulus
Fed policy makers have said they will maintain stimulus until the labor market improves “significantly.” The economy’s inability to sustain faster growth means central bankers will probably affirm a pledge to keep buying bonds when they meet next week. The Labor Department releases its monthly jobs report on May 3.
Global stocks rallied this week as speculation mounted the European Central Bank will cut rates on May 2. The majority of 61 economists in a Bloomberg News survey have predicted that the central bank will lower its benchmark rate to 0.5% from 0.75%.
Sixteen S&P 500 companies posted quarterly earnings today. Of the 270 that have released results so far this reporting season, 74% have exceeded analysts’ predictions, data compiled by Bloomberg show. Analysts are turning more bullish on corporate earnings. Profit at S&P 500 companies gained 1.1% in the first three months of the year, according to analysts’ projections compiled by Bloomberg. That compares with last week’s projection for a decline of 1.1%.
Volatility Index
The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.8% to 13.51. The CBOE opened for trading three-and-a-half hours late yesterday after a problem with its computer systems shut the derivatives market. The equity volatility gauge is down 25% for the year.
Technology stocks erased an earlier decline of as much as 0.4%. Hewlett-Packard Co. rallied the most in the Dow, adding 2.5% to $20.07. Apple Inc. added 2.3% to $417.84.
J.C. Penney surged 14% for the biggest gain in the S&P 500 to $17.34. Soros Fund Management LLC’s stake is equal to 7.9% of J.C. Penney, according to a filing yesterday. The investment makes the billionaire the fourth-largest shareholder, according to data compiled by Bloomberg.
Chevron Rises
Energy stocks rebounded as Chevron Corp. gained 1.5% to $120.32. The world’s third-biggest energy company by market value reported first-quarter profit that exceeded analysts’ estimates after boosting natural gas output amid rising prices for the fuel.
The S&P Supercomposite Homebuilding Index rose for the sixth straight day, adding 3.2%. The measure of 11 homebuilders is at the highest level since March 21.
D.R. Horton Inc. increased 8.7% to $26.66, the highest since February 2007. The largest U.S. homebuilder by volume said its fiscal second-quarter profit more than doubled as demand for new houses climbed in a recovering market.
Raw-materials producers fell the most out of 10 S&P 500 groups, losing 1.2%. Alcoa Inc. slumped 0.8% to $8.32. The largest aluminum producer in the U.S. had its credit rating outlook revised to negative by S&P Ratings Service after a slump in the price of the metal. DuPont Co. erased 0.5% to $53.02.
Amazon, Starbucks
Amazon dropped 6.5% to $256.82 as the world’s largest online retailer forecast a range between an operating loss of $340 million and a profit of $10 million for the second quarter. Analysts on average project a profit of $165.1 million. The maker of Kindle tablets said late yesterday first-quarter net income fell 37% to $82 million, or 18 cents a share.
Starbucks slid 0.5% to $60.19 as the world’s biggest coffee-shop operator posted fiscal second-quarter revenue of $3.56 billion, missing the $3.58 billion median estimate of analysts in a Bloomberg survey.
“Europe continues to be just a challenging place for us -- it’s a very, very difficult macro environment there,” said Chief Financial Officer Troy Alstead.
Expedia declined 9.5% to $58.77 as Chief Financial Officer Mark Okerstrom lowered his 2013 forecast for so-called organic earnings before interest, taxes, depreciation and amortization by $20 million to $30 million, citing increased competition facing its Hotwire discount-travel website.
