Stocks Rebound to Post Weekly Gains

Sat, 19 Jul 2014 01:26:39 GMT

By Alexandra Scaggs and Saumya Vaishampayan U.S. stocks recovered from Thursday's swoon to end the week higher, as worries over the conflicts in Eastern Europe and the Middle East receded.The Dow Jones Industrial Average rose 123.37 points, or 0.7%, to 17100.18.The S&P 500 index rose 20.10 points, or 1%, to 1978.22, with the health-care and technology sectors leading gains. It was the largest percentage gain since April 16.Stocks rallied Friday after tumbling to their steepest decline in two months during the previous session. On Thursday, shares fell after a Malaysia Airlines passenger jet crashed near the Russia-Ukraine border, which the U.S. has since tied to pro-Russia separatists in the region. The losses also were fueled by news that Israel began a ground invasion into the Gaza Strip.Investors said Friday's gains showed the resilience of this year's stock-market advance amid persistently low interest rates and continued growth in corporate profits. The S&P 500 closed 0.5% higher on the week, leaving it up 7% year to date. The Dow rose 0.9% for the week and is up 3.2% for the year. "It's nice to see markets holding in there," said Jeff Knight, global head of asset allocation for Columbia Management. "A few years ago, you would have had contagion every time you had a bad news story?now there's more confidence in the system."The week's tumult shattered the calm that had descended on financial markets. Before Thursday, the S&P 500 had gone 62 sessions without a move of more than 1%.Stocks weathered some volatility earlier in the week, when Federal Reserve Chairwoman Janet Yellen testified to Congress. Stocks in some pricey corners of the market dove after a report from the central bank said valuations look stretched for biotechnology, social-media and small stocks.But Friday, they rebounded. Technology and social-media stocks rallied after strong second-quarter results from Google. The tech giant's shares rose $21.35, or 3.7%, to $595.08 after it posted stronger revenue growth than Wall Street had expected, excluding the Motorola Mobility business that it plans to sell to Lenovo Group.The tech-heavy Nasdaq Composite Index jumped 68.70 points, or 1.6%, to 4432.15."Google is a bellwether for the Internet names," said Anthony DiClemente, an analyst with Nomura Securities.The Nasdaq Biotechnology Index rose 3%, and the small-cap benchmark Russell 2000 Index tacked on 1.6%. For the week, however, both benchmarks declined, with biotech stocks off 2.6% and small-caps down 0.7%.Broadly, investors say they are looking past political tensions, focusing instead on corporate earnings and assurances from the Fed that it will continue to keep policy accommodative. Companies in the S&P 500 are on track for about 5.5% of growth in second-quarter earnings compared with a year earlier, according to FactSet."Nothing that we're seeing?has suggested that earnings are going to spoil the party at this point," said Gordon Charlop, managing director at Rosenblatt Securities.Declining long-term interest rates have helped prop up stocks this year, strategists say, as investors search for income amid low yields in the bond market. The yield on the 10-year U.S. Treasury note closed Friday at 2.485%, for its largest two-week drop since the start of this year.In economic news, a consumer-sentiment gauge fell unexpectedly in July, as the Thomson-Reuters/University of Michigan preliminary July sentiment index fell to 81.3, missing expectations for a rise to 83.0. The Conference Board's index of leading economic indicators rose less than expected in June, up 0.3% on the month, while a rise of 0.5% was forecast.Health-care stocks led the S&P 500 higher after AbbVie said it struck a deal to acquire Shire for about $54 billion that has the backing of the Shire board. The U.S. drug maker's previous four takeover offers since mid-June had been rejected. U.S.-listed shares of Shire rose 3.62, or 1.4%, to 257.06, while shares of AbbVie gained 1.36, or 2.6%, to 54.91.In other corporate news, General Electric shares fell 15 cents, or 0.6%, to 26.46, after its second-quarter revenue fell short of analysts' expectations. It said it expects to raise $3.1 billion in the sale of a 15% stake in Synchrony Financial.European shares were little changed, with the Stoxx Europe 600 down less than 0.1%.In commodity markets, gold futures declined 0.6% to $1,309.20 an ounce, while crude-oil futures dropped 0.1% to $103.13 a barrel. Write to Alexandra Scaggs at alexandra.scaggs@wsj.com and Saumya Vaishampayan at saumya.vaishampayan@wsj.com

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Stocks Rebound to Post Weekly Gains