U.S. stocks rose during one of the slowest trading days of the year as Internet and small-cap shares extended a rebound from losses last week.
Pandora Media Inc., TripAdvisor Inc. and Netflix Inc. increased more than 4 percent to lead gains in Internet stocks.
The S&P 500 (CME:SPM14) gained 0.4 percent to 1,885.07 at 4 p.m. in New York, following the first back-to-back weekly losses since January. The Russell 2000 Index added 1 percent. Trading in S&P 500 companies was 17 percent below the 30-day average for this time of day.
“We’ve seen a lot of volatility but not a lot of direction in the past few months and that’s what’s become the norm,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said in a phone interview. “We don’t think we’re near a major market top. Those are generally characterized by a lot of optimism and euphoria and we don’t think that’s the case.”
The S&P 500 retreated less than 0.1 percent last week amid reports that showed consumer confidence fell in May from a nine- month high, while industrial production unexpectedly declined last month. The benchmark index reached an all-time high of 1,897.45 on May 13 before a selloff in small-cap stocks spread to the broader market.
The Russell 2000 Index of small-cap stocks fell 3.3 percent over three days last week before rebounding 0.6 percent on May 16. The gauge is 7.8 percent below its record from March.
The Dow Jones Internet Composite Index jumped 1.5 percent, adding to a 0.5 percent advance in the previous session. The gauge has trimmed its loss for the year to 8.2 percent.
The S&P 500 is trading at 17.3 times reported earnings, near the highest level since 2010. Of the 466 S&P 500-listed companies that have released results this season, 76 percent have beaten estimates for profit, while 53 percent have exceeded projections for revenue.
Federal Reserve Chair Janet Yellen said last week the U.S. economy has further to go to achieve full health and predicted small businesses will play a vital role in the recovery.
The central bank will release on May 21 minutes from its latest meeting. Policy makers said last month the economy is showing signs of picking up and the job market is improving. The central bank pared its monthly asset-buying and said further reductions in “measured steps” are likely.
Three rounds of monetary stimulus, known as quantitative easing, have helped fuel economic growth, sending the S&P 500 surging as much as 180 percent from its 2009 low.
“We began the year with a market that’s nervous, peaking out to new highs, but still nervous,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., said by phone. Her firm oversees over $1 trillion in assets. “As we near the end of QE, this market is getting more and more normal. Valuations are stabilizing and froth is getting burned off. Growth stocks were part of that froth. Fund managers were thinking ‘take profits now or this summer could be dicey.’”
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