Stocks Bounce Back

Tue, 04 Feb 2014 21:17:02 GMT

By Kaitlyn Kiernan Stocks rose Tuesday as investors breathed a sigh of relief following the biggest one-day drop in more than six months, but traders remained cautious as global-growth concerns lingered.The Dow Jones Industrial Average added 72.44 points, or 0.5%, to 15445.24. On Monday, the Dow tumbled 326 points, or 2.1%, the biggest one-day selloff in more than seven months, on growing concerns over a weakening U.S. economy.The S&P 500 index climbed 13.31 points, or 0.8%, to 1755.20, with consumer-discretionary and telecommunications shares leading nine of 10 sector groups higher. The Nasdaq Composite advanced 34.56 points, or 0.9%, to 4031.52.U.S. markets slumped Monday after a weak report on manufacturing activity prompted concern about economic growth. That came after weeks of worry stemming from political and economic turmoil in emerging markets. Developing-world currencies and stocks recovered slightly Tuesday.There was no single piece of news behind the gains in U.S. stocks, but traders said a rebound was to be expected after the significant fall Monday."It isn't uncommon to have a bit of a snap back after a day like we had Monday," said Paul Zemsky, chief investment officer of multiasset strategies at ING U.S. Investment Management, which oversees $200 billion."But we need to wait for a follow-through before we feel comfortable," he said. "Given the market concern about growth, economic data will be of increased significance at the moment."Tuesday was a quiet day on the economic calendar, but investors are looking ahead to a series of reports on the employment situation in the U.S., starting with the ADP employment report due Wednesday from the nation's largest payroll processor and concluding Friday with the federal government's monthly report. David Kelly, chief global strategist at J.P. Morgan Funds, said investors are looking to the jobs numbers to either validate or disprove the weak reading on manufacturing activity that was behind the large stock decline."People want to see if there is real weakness in the U.S. economy or if the [manufacturing] number was just a fluke," Mr. Kelly said. "If we see a weak jobs number, the market could pretty quickly extend recent losses, or pretty quickly reverse them with a stronger number."Mr. Kelly said long-term investors shouldn't be deterred by the market declines of late and should remain invested in stocks, with a focus on industrial and financial shares. He said he still sees the potential for stronger gains from U.S. stocks than from bonds this year.The market "feels like it wants to bounce off the drastic move Monday" but didn't have much conviction yet, said Jonathan Corpina, senior managing partner at New York brokerage Meridian Equity Partners."We're really more concerned about Wednesday and Thursday," Mr. Corpina said. "Stocks need to see additional gains to show real strength with this bounce." He said the buyers Tuesday were people who saw Monday's 2% decline as an opportunity to pick up new investments.Emerging-market currencies rose against the dollar Tuesday, recovering modestly from their sharp selloff of the past two weeks. The South African rand and Turkish lira, two of the hardest-hit currencies, led the rebound. The iShares MSCI Emerging Markets exchange-traded fund rose.Investments often seen as havens, such as Treasurys and gold, eased slightly as stocks recovered. The yield on the 10-year Treasury note inched up to 2.622% from a near-three-month low of 2.585% late Monday. Treasury yields rise as prices fall. Gold futures declined 0.7% to $1,251.70 an ounce, after running up 1.6% Monday.Meanwhile, crude-oil futures added 0.8% to $97.19 a barrel, and the dollar gained some ground against the euro and the yen.In Europe, the Stoxx Europe 600 declined 0.2% to a nearly two-month low. The index pared some losses after the producer-price index for the euro zone rose in December for the first time in three months, slightly easing deflation fears.The DAX 30 index shed 0.6%, and the U.K.'s FTSE 100 dropped 0.3%, while France's CAC 40 gained 0.2%.Japanese stocks tumbled overnight to follow the steep declines in the U.S. Monday. The Nikkei Stock Average dropped 4.2%, rattled by disappointing data out of the U.S., after sliding 2% Monday. That left the Nikkei down 14% on the year, the worst performance among major global markets. Hong Kong's Hang Seng Index slumped 2.9%.In corporate news, Microsoft slipped after the software company named company veteran Satya Nadella as its next chief executive. The tech firm also said founder Bill Gates, who previously was chairman, moves to a new role on the board as technology adviser and will devote more time to the company, supporting Mr. Nadella in shaping technology and product direction. J.C. Penney plunged after investors took a closer look at quarterly sales numbers. The retailer announced a 2% increase in same-store sales for the fourth quarter, the first time since the second quarter of 2011 that comparable sales grew. But analysts at Sterne Agee suggest that the numbers are "not good enough" if J.C. Penney "is to survive as currently constituted." UBS jumped after beating analyst expectations with a sharp swing to a profit in the fourth quarter, as Switzerland's biggest bank pushes ahead with a bid to operate in slimmed-down form. Yum Brands rallied after the parent company of KFC and Taco Bell reported fourth-quarter adjusted earnings that exceeded expectations and affirmed previous 2014 projections. Michael Kors soared after the company reported earnings and revenue that blew past estimates, boosted by strong same-store sales growth in Europe and the U.S. Take-Two Interactive Software tumbled after the maker of the Grand Theft Auto game franchise provided a downbeat outlook for the current quarter, although fiscal third-quarter earnings and revenue exceeded estimates. ATMI surged after the company agreed to be acquired by fellow semiconductor-services company Entegris for about $850 million. Entegris also gained. Write to Kaitlyn Kiernan at kaitlyn.kiernan@wsj.com

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Stocks Bounce Back