U.S. stocks fluctuated on Wednesday, a day after slipping to a two-month low, as declines in Sprint Corp. and Time Warner Inc. on merger news offset gains in consumer-staples shares.
Sprint slid 19 percent after a person with knowledge of the matter said it ended talks to acquire T-Mobile US Inc. Time Warner tumbled 13 percent after Rupert Murdoch’s 21st Century Fox Inc. withdrew its unsolicited takeover bid. Molson Coors Brewing Co. and Kellogg Co. led gains in consumer-staples shares.
The Standard & Poor’s 500 Index added less than 0.5 percent to 1,921.20 at 3:53 p.m. in New York. The gauge erased an earlier loss after dropping below its average level for the past 100 days. The Dow Jones Industrial Average added 19.59 points, or 0.1 percent, to 16,449.06. Trading in S&P 500 companies was 19 percent above the 30-day average for this time of day.
“There’s going to be a lot of noise intraday going forward, but we still see the fundamental trend moving higher,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said. His firm oversees $4.6 billion. “We might slip back to flush out the remaining weak hands, but we’re recommending buying this dip.”
The S&P 500 slid 1 percent on Tuesday to the lowest level since May as tensions escalated over Ukraine. The benchmark gauge has lost 3.4 percent since reaching a record of 1,987.98 on July 24. It tumbled the most since June 2012 last week as companies around the globe posted disappointing results, Argentina defaulted and Banco Espirito Santo SA was ordered to raise capital.
Russian President Vladimir Putin is showing no sign of backing down over Ukraine. He ordered restrictions on food imports to strike back at the U.S. and other countries that have imposed sanctions on Russia over the turmoil in Ukraine. Putin’s decree bans or limits food and agricultural imports for one year from countries that have imposed or supported sanctions, according to the Kremlin website. The government is drawing up a list of restricted goods.
NATO Deputy Secretary General Alexander Vershbow said Russia has amassed about 20,000 troops along its border with eastern Ukraine.
Stocks have also been weighed down by concerns that the improving economy may force the Federal Reserve to raise interest rates sooner than expected. Data last week showed U.S. gross domestic product expanded at a 4 percent annual pace in the second quarter, confirming the Fed’s view that a first- quarter contraction was transitory.
The S&P 500 has soared 184 percent since the start of the bull market in March 2009, boosted by three rounds of central bank stimulus and better-than-forecast corporate earnings. The benchmark equity gauge has gone without a 10 percent correction since 2011. It trades at 17.4 times the reported earnings of its companies, after reaching the highest level since 2010 in June.
About 75 percent of those that have posted results this season have beaten analysts’ estimates for profit, while 64 percent exceeded sales projections, data compiled by Bloomberg show.
Profit probably rose 9.4 percent in the second quarter, while sales gained 4.2 percent, according to analyst estimates compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, which usually moves in the opposite direction to the S&P 500, fell 3.4 percent to 16.30 today. The VIX soared 34 percent last week, the most since January.
Four out of 10 major industries in the S&P 500 advanced. Consumer-staples companies added 0.8 percent. Phone and utility shares dropped more than 1.3 percent.
Sprint slid 19 percent. Regulatory concerns outweighed the potential benefits of a merger with T-Mobile US that would combine the third and fourth-largest U.S. wireless carriers, according to the person with knowledge of the matter. Sprint also named Marcelo Claure, the founder of mobile-phone distributor Brightstar Corp., as its new chief executive officer.
T-Mobile retreated 8.3 percent.
Time Warner dropped 13 percent as Murdoch’s Fox withdrew its $75 billion offer. The billionaire chairman of Fox gave up after Time Warner’s board refused to engage in talks and Fox’s stock price slid 11 percent since the offer became public. Time Warner also reported earnings that beat estimates and said it plans to buy back $5 billion of its shares.
Fox climbed 3.5 percent as it authorized a $6 billion buyback plan. The company is scheduled to report fiscal fourth- quarter earnings after the market close.
Walgreen Co. retreated 14 percent. The biggest U.S. drugstore chain said it will pay about $15.3 billion for the shares in Alliance Boots it doesn’t already hold, and won’t use the deal to move its tax address abroad.
Walgreen, which considered redomiciling in Switzerland to lower its tax rate, has come under political pressure not to do a so-called tax inversion. U.S.-based companies, including drugmakers AbbVie Inc. and Pfizer Inc., have struck or attempted deals to cut their own rates by establishing their tax headquarters abroad.
Groupon Inc. slumped 13 percent. The company forecast third-quarter earnings of no more than 2 cents a share, excluding some items, compared with the average analyst estimate of 3 cents a share.
Cognizant Technology Solutions Corp. tumbled 12 percent, the most in more than two years. The provider of outsourcing services lowered its annual revenue forecast as tech-service deals took longer to close amid weakness in certain U.S. and U.K.-based customers.
Bank of America gained 1.2 percent. The second-biggest U.S. lender raised its quarterly dividend to 5 cents a share and dropped plans to buy back stock after the Fed approved its resubmitted capital plan for 2014.
The dividend increase, from 1 cent per share, was postponed in April after the Charlotte, North Carolina-based company said it made an error in its original Fed submission. The central bank said today it didn’t object to the company’s revised plan.
Molson Coors gained 5.7 percent, the most in the S&P 500, as it reported second-quarter earnings and revenue that surpassed analysts’ projections.
Kellogg advanced 2.1 percent as Sky News reported, without saying where it got the information, that the cereal company appointed Barclays Plc. to assess an offer for United Biscuits Holding Ltd.
Valero Energy Corp. and Marathon Oil Corp. added more than 1.2 percent to lead energy shares higher. Energy companies fell 2.1 percent yesterday and plunged 4.1 percent last week, the most since June 2012.
Activision Blizzard Inc. advanced 2.6 percent. The largest U.S. video-game maker posted second-quarter results that beat analysts’ estimates, citing online sales of World of Warcraft and Diablo titles. The company also raised its full-year forecast.
Pandora Media Inc. added 1.6 percent as it reached a partnership agreement with Merlin, the rights agency that represents independent record companies, in its first direct deal with music labels. Pandora will create customized channels for artists, letting them communicate with fans, according to a statement today.
AOL Inc. rose 8.5 percent after revenue topped forecasts.
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