S&P 500 Ekes Out Gain as Consumer Shares Overshadow Energy Slide

  • Energy, raw-materials fall amid China's slower growth
  • Consumer shares climb led by Netflix, Priceline Group

Slower growth in China may have taken a toll on commodity shares, but U.S. benchmark indexes managed to eke out gains as consumer companies came to the rescue.

Consumer shares were bolstered by gains in Internet companies, with Priceline Group Inc. and Netflix Inc. rising more than 2.7 percent. Expedia Inc. added 2.4 percent. Intel Corp. climbed 1.7 percent amid deal activity among semiconductors as Microsemi Corp. offered to buy PMC-Sierra Inc. for about $2.4 billion. International Business Machines Corp. fell in late trading as quarterly revenue missed estimates.

The Standard & Poor’s 500 Index added less than 0.1 percent to 2,033.66 at 4 p.m in New York, after falling as much as 0.5 percent. The Dow Jones Industrial Average climbed 14.57 points, or 0.1 percent, to 17,230.54. The Nasdaq Composite Index advanced 0.4 percent, boosted by gains in biotechnology Internet shares. About 6 billion shares traded hands on U.S. exchanges, 19 percent below the three-month average.

“It’s not a surprise the markets haven’t responded much to China’s GDP number because it wasn’t that far from consensus,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “People are going to be focusing on earnings, but I think earnings will have more of an impact on individual names than the overall market.”

After markets closed, IBM reported third-quarter revenue that fell short of analysts’ estimates, as currency fluctuations crimped sales. Revenue fell 14 percent, marking the 14th straight period of declines. The shares fell 4.7 percent in after-hours trading.

A report today showed China’s economy expanded quicker than economists forecast in the third quarter as the services sector offset weaker manufacturing. While the 6.9 percent growth in gross domestic product was the slowest since 2009, the stabilization should ease fears of a deeper downturn.

The S&P 500 is rebounding from its worst quarter in four years, even as investor sentiment swings between concern over China’s slowdown and optimism that the Federal Reserve is in no hurry to raise interest rates. The probability of a U.S. rate increase this year has diminished to 39 percent, from 64 percent before the Fed’s September meeting, with March the first month for which traders price in at least even odds of a rate boost.

The main equity benchmark is up 5.9 percent in October and closed Friday at the highest level since Aug. 20, rising above a level where past rallies since the summer selloff have lost momentum. While the S&P 500 capped its longest weekly winning streak since May, investors withdrew $1.5 billion this month through Oct. 15 from an exchange-traded fund tracking the gauge.

Earnings Season

“The earnings season and the expectations for a Fed rate hike are the key near-term factors,” said Otto Waser, chief investment officer at R&A Group Research & Asset Management AG in Zurich. “Expectations are still low for earnings and global companies are still suffering from a strong dollar. Still, we’re not that far away from the levels at the start of August and we could get there this quarter.”

Analysts project profit for S&P 500 members dropped 6.7 percent in the third quarter, with energy and materials companies showing the steepest decline. Some 117 of the benchmark’s member companies report results this week.

With earnings and revenue declining, the biggest expansion of U.S. stock dividends in eight decades is slowing down. Payouts by S&P 500 companies are poised to rise about 5 percent in the fourth quarter, the smallest increase since they plummeted in the aftermath of the 2008 financial crisis, data compiled by Bloomberg and S&P Dow Jones Indices show.

Winners and losers in the S&P 500’s 10 main groups were evenly split Monday, with consumer, technology and health-care companies rising the most. Energy and raw-materials were the worst performers, down more than 0.7 percent. The Chicago Board Options Exchange Volatility Index slipped 0.5 percent to 14.98 The measure of market turbulence known as the VIX is on track for a 39 percent monthly drop, the most ever.

Netflix, Nike

Consumer discretionary companies in the benchmark gauge advanced, as Priceline Group Inc. and Netflix Inc. added more than 2.4 percent each. Citron Research said in a Twitter post that it covered its Netflix short position. Nike Inc. rose 2.1 percent as shares of the world’s largest maker of athletic gear were raised to buy from hold at BB&T Capital Markets.

Walt Disney Co. gained 1.1 percent to a two-month high. Theater chains in the U.K. struggled to meet exploding online demand for “Star Wars: The Force Awakens” as exhibitors began selling tickets to a film debut that’s still two months off. It’s the first in a series of “Star Wars” films Disney is creating after acquiring franchise-owner Lucasfilm Ltd. for $4 billion in 2012.

Food companies paced gains in consumer staples, with Tyson Foods Inc. and Mondelez International Inc. rising at least 1.2 percent.

Weight Watchers International Inc. jumped 105 percent on news that Oprah Winfrey will buy 10 percent of the company and join its board. The stock traded to its highest level since February.

The Bloomberg U.S. Airlines Index reversed Friday’s drop, rising 2 percent as oil slid amid speculation that lower fuel costs will help carriers’ profitability. JetBlue Airways Corp. and Delta Air Lines Inc. gained more than 2.3 percent.

In addition to PMC-Sierra’s rally, SanDisk Corp. gained 2.9 percent to the highest level since April, while Micron Technology Inc. added 3.6 percent. Microsemi’s offer for PMC-Sierra tops a prior bid from Skyworks Solutions Inc. Semiconductor makers are pursuing deals with more earnest this year as surging costs for design and manufacturing, coupled with a shrinking customer base, have created a need to bulk up.

Aside from chipmakers, other tech stocks were largely mixed. IBM fell 1.2 percent ahead of the release of its third-quarter results, scheduled after the market close. Qualcomm Inc., Oracle Corp. and Seagate Technology Plc sank more than 1.3 percent.

The health-care companies in the S&P 500 rose for a third consecutive day to the highest in almost a month, led by a 2.4 percent gain in Intuitive Surgical Inc. before its quarterly earnings report on Tuesday. An exchange-traded fund of biotech stocks increased 0.8 percent to its highest since Sept. 25.

Energy Falls

Exxon Mobil Corp. and Chevron Corp. lost at least 1.3 percent as crude fell on signs the global surplus will only gradually dissipate. Murphy Oil Corp. and Marathon Oil Corp. declined more than 4.7 percent. Copper producer Freeport-McMoRan Inc. and steel maker Nucor Corp. paced declines in raw materials, slumping at least 2.4 percent.

Hasbro Inc. dropped 7.2 percent, the most in more than four years. Quarterly sales missed analysts’ estimates, hurt by a decline in its girls’ toy brands. Revenue generated by girls brands, including My Little Pony and Furby, sank 28 percent.

Wynn Resorts Ltd. retreated for a second session, losing 6.4 percent. Macau’s government hit back at Steve Wynn’s criticism of its policies, demanding casino operators comply with its rules days after the Las Vegas tycoon criticized delays in being informed how many gaming tables he will get for a new multi-billion dollar resort.

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