U.S. Stocks Little Changed as China Worry Fades, Energy Slips

  • Facebook, Alphabet bolster gains among Internet shares
  • Oil's slide from three-week high drags down energy producers

U.S. stocks closed little changed, with gains in Facebook Inc. and Alphabet Inc. helping to overcome concerns that China’s slowdown will spread as slumping crude oil led a selloff in energy shares.

Internet companies put a floor under equities, with Facebook and Google parent Alphabet rising more than 1.2 percent. Netflix Inc. increased 2.5 percent amid speculation Apple Inc. could make an offer for the online video company. Energy companies retreated with crude, after capping back-to-back weekly advances for the first time since November. Exxon Mobil Corp. sank 2 percent before its earnings report Tuesday. Alphabet rose in late trading after its earnings report.

The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,939.38 at 4 p.m. in New York, after erasing a drop of as much as 1 percent. The Dow Jones Industrial Average lost 17.12 points, or 0.1 percent, to 16,449.18, while the Nasdaq Composite Index rose 0.1 percent. About 8 billion shares traded hands on U.S. exchanges, 4 percent above the three-month average.

“I actually expect a positive start into the new month but the market is still shaky and February will be not easy,” said Benno Galliker, a trader at Luzerner Kantonalbank AG. “The focus is on China, oil and earnings. The weak numbers out of China and the lower oil price are keeping a lid on the market.”

Equities began paring declines in earnest in afternoon trading after dovish comments from Federal Reserve Vice Chairman Stanley Fischer, who said the central bank’s policy moves are not predetermined as it assesses the impact of recent market turmoil.

Worries about a slowdown in the world’s second-biggest economy and a rout in oil have roiled global equities this year. While the S&P 500 recouped some losses in the past two weeks, paring its January drop to 5.1 percent, China’s official factory gauge today signaled a record sixth month of deterioration.

The main U.S. equity gauge is 9 percent away from an all-time high set in May, and has rebounded 4.3 percent from a 21-month low on Jan. 20, led by a 10 percent climb by phone companies and a 9.8 percent increase in energy producers.

Amid the turbulence, investors have been loading up on shares of companies with the sturdiest earnings momentum. Qualities that define winning investments no longer include the high-risk, high-reward potential of companies whose balance sheets are laden with debt. Such a shift has been a bearish signal for stocks in the past, often marking the end of bull markets.

More than 100 S&P 500 companies are due to report results this week. Alphabet rose 6.2 percent as of 4:55 p.m. after Google reported profit and revenue that topped estimates, lifted by robust sales of online ads and tighter cost controls.

Analysts estimate profits at index members fell 5.6 percent in the fourth quarter, better than Jan. 15 predictions for a 7 percent slump. Of those that have released financial results, 79 percent beat profit projections, while 49 percent topped sales estimates.

Investors are also assessing economic releases for indications on the strength of the U.S. economy. Data today showed manufacturing shrank in January for a fourth consecutive month as businesses cut staffing plans. A separate report showed household spending cooled in December as Americans used gains in incomes to boost their savings, with little evidence that inflation is gaining traction.

Fed’s Fischer

Attention will turn later in the week to jobs data, with a reading on private payrolls growth scheduled for Wednesday and the government’s January jobs report due Friday. Fed Vice Chair Stanley Fischer said today it was too difficult to gauge the impact on the U.S. economy from recent turmoil in financial markets and uncertainty over China, leaving policy makers undecided about what to do next.

The Chicago Board Options Exchange Volatility Index fell 1.1 percent Monday to 19.98. The measure of market turbulence known as the VIX rose for a third straight month in January, the longest such streak in 2 1/2 years.

Phone companies and utilities were Monday’s best performers among the S&P 500’s 10 main groups, rallying at least 0.9 percent. Consumer, raw-materials and technology shares also rose. Energy companies lost 1.9 percent, paring an earlier 3.3 percent drop.

“Usually when oil’s down this much you’d see stocks down,” said Larry Peruzzi, managing director of international equities at Mischler Financial Group Inc. in Boston. “After the last two weeks traders and investors are just emotionally spent with huge up days and huge down days. Central banks and people searching through earnings numbers offsets it a little bit.”

Utilities Rally

CenterPoint Energy Inc. gained 4.2 percent to bolster an advance among utilities. The owner of Houston’s electric utility said it may sell or spin off to shareholders its stake in Enable Midstream Partners LP as falling fuel prices weigh on the pipeline owner’s value. The company’s 2016 profit outlook also exceeded estimates.
 
Questar Corp. rallied 23 percent after Dominion Resources Inc., the owner of Virginia’s largest utility, said it will buy the company for about $4.4 billion to expand its holdings in better-performing natural gas assets. Duke Energy Corp. added 2.3 percent to a five-month high after Lockheed Martin Corp. agreed to buy 30 megawatts of capacity from a Duke Energy solar farm in North Carolina.
 
Google parent Alphabet Inc. climbed to a 2016 high before its earnings report and Facebook extended its climb to a fresh record. An index of Internet companies rose for a third session, the longest streak in more than a month. Twitter Inc. surged 6.6 percent, its best advance in almost four months, after a report in The Information said investor Marc Andreessen and private equity firm Silver Lake have “considered some sort of deal.”

Sysco Corp. jumped 8.4 percent, the most in more than two years to close at a record after the food distributor’s quarterly results exceeded estimates. The shares led gains in consumer staples, with Kroger Co. and Whole Foods Market Inc. increasing at least 2.2 percent.

Energy, Banks

Kinder Morgan Inc. and Devon Energy Corp. fell at least 6.5 percent to lead the slide in energy. After rising to a three-week high on Friday, West Texas Intermediate crude futures sank 6 percent on signs industrial activity in China is deteriorating, potentially hurting demand as OPEC pumps record amounts of crude.

Financial shares slid, with banks in the benchmark index falling for the first time in five sessions. Bank of America Corp. and JPMorgan Chase & Co. fell more than 1 percent. Yield on the U.S. 10-Year U.S. Treasury bond has declined 14 percent since the start of the year.

Industrial companies also fell, led by a 6.8 percent drop in Roper Technologies Inc. The company reported quarterly earnings below analysts’ estimates, and reduced its outlook for 2016 profits. Raytheon Co. and General Electric Co. lost at least 1.5 percent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE