U.S. Stocks Little Changed After Rally; Tech vs. Energy
New York (Dec 22) U.S. stocks fluctuated, after the biggest three-day jump since 2011, as gains in technology shares offset the first drop in five days for energy companies.
Facebook Inc. and Intel Corp. rose more than 1.4 percent to pace gains among technology shares. Chevron Corp. lost 1.3 percent as energy companies were the worst performers in the Standard & Poor’s 500 (SPX) Inc. The Nasdaq Biotechnology Index slumped 1.4 percent as Gilead Sciences Inc. sank 11 percent.
The Standard & Poor’s 500 Index added 0.1 percent to 2,072.12 at 10:12 a.m. in New York, near a record close. The Dow Jones Industrial Average jumped 76.87 points, or 0.4 percent, to 17,881.67. Trading in S&P 500 companies was 5.2 percent below the 30-day average for this time of the day.
“It’s going to be pretty tough to divine anything meaningful from the market this week with Christmas coming up on Thursday and with trading desks half-staffed,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “If anything, you’re likely to see more impetus to show more equity positions and less cash going into year end, and you’re likely to see short positions drawn down.”
U.S. equities jumped 5 percent in the past three sessions as Fed Chair Janet Yellen said the central bank will likely hold key rates near zero at least through the first quarter, even as the U.S. economy strengthens.
The gauge erased its loss for the month and closed 5 points below a record of 2,075.37 reached Dec. 5. The S&P 500 has advanced in each of the past six Decembers.
A slide in oil prices and a worsening of the financial crisis in Russia rippled through financial markets earlier this month, wiping more than $1 trillion from U.S. equity values in less than two weeks. The S&P 500 lost 5 percent in seven trading days through Dec. 16.
Fifth Recovery
Equities rallied around the world after the central bank said it will be patient on the timing of a rate increase. Yellen said any spillover from the situation in Russia is likely to be small.
The benchmark index is points away from completing the fifth recovery this year from a decline of 4 percent or more, just 17 days after it started. In comparable drops beginning in January, April, July and September, the S&P 500 needed about a month to erase losses, data compiled by Bloomberg show.
U.S. stocks have tripled during the 5 1/2-year bull market, driven by the Fed’s three rounds of bond buying and borrowing costs near zero to stimulate the economy.
Data today showed purchases of previously owned U.S. homes dropped more than forecast in November as residential real estate struggles to sustain its recovery even as borrowing costs remain low. Sales fell 6.1 percent to a 4.93 million annual rate last month, the weakest reading since May, from 5.25 million pace in October, according to figures from the National Association of Realtors.
Increased Volatility
Even as stocks rebounded, JPMorgan Chase & Co. and Bank of America Corp. have warned that equity volatility is picking up and upheavals will become more common next year. Three weeks into December, the Chicago Board Options Exchange Volatility Index has already risen 99 percent and fallen 30 percent.
It’s the second time in two months that the gauge of trader anxiety known as the VIX jumped above 20, only to erase more than half its gain within three days. Bouts of volatility are likely to plague investors more in 2015 as the Fed gets closer to raising interest rates, according to strategists from the banks.
Gilead Slides
Gilead slid 11 percent after the biggest drug-benefit manager in the U.S. chose a pill from AbbVie Inc. to be the sole hepatitis C treatment approved for many patients, as insurers seek to rein in the rising cost of medicine.
Express Scripts Holding Co., which helps insurers and large employers provide drug coverage, opted to narrow doctors’ treatment options in exchange for lower prices. On its most widely used list of approved drugs, Express Scripts will include AbbVie’s Viekira Pak for patients with genotype 1, the nation’s most common form of hepatitis C.
Express Scripts has waged a campaign all year against Gilead’s hepatitis C drugs, calling their cost of more than $1,000 a pill part of an unsustainable trend of surging prices for medicine designed to treat complex health conditions.
Source: Bloomberg
