U.S. Stocks Rally as Health-Care, Energy Shares Lead a Rebound

Rough Quarter for Managers Amid Stock Pickers' Market
  • Drug companies jump amid deal speculation, oil boosts energy
  • S&P 500 bounces after its biggest decline since March 8

U.S. stocks advanced, with the Standard & Poor’s 500 Index posting its best gain in more than three weeks, as health-care shares rallied on deal speculation and energy producers surged with crude oil.

The main benchmark index halted a two-day slide as Pfizer Inc.’s busted deal with Allergan Plc sparked speculation the two companies will now turn their attention to other potential merger targets, sending biotechnology companies to their strongest rally in more than four years. An unexpected drop in crude stockpiles drove crude and energy producers to their biggest gains in three weeks.

The S&P 500 rose 1.1 percent to 2,066.66 at 4 p.m. in New York, recovering from the biggest two-day drop since Feb. 9, with gains accelerating in trading’s final hour. After the longest span without a 1 percent move in more than a year, the index has posted two such swings back to back. The Dow Jones Industrial Average climbed 112.73 points, or 0.6 percent, to 17,716.05. The Nasdaq Composite Index advanced 1.6 percent to a 2016 high, lifted by gains among biotechs.

Equities held onto their climb after minutes from the Federal Reserve’s last meeting showed policy makers were worried that slowing world growth could reduce corporate investment plans and restrain U.S. exports.

Pfizer capped its biggest rally in four years after agreeing to end its $160 billion merger with Allergan, which added 3.4 percent after its biggest drop since 2004. Halliburton Co. rose 5.9 percent, with investors reacting positively to another possible broken deal after the oil-services firm was sued by U.S. antitrust officials who say its planned takeover of Baker Hughes Inc. threatens competition and should be blocked. Baker Hughes rallied 8.8 percent, the most since August.

The Chicago Board Options Exchange Volatility Index fell 8.6 percent Wednesday to 14.09. The measure of market turbulence known as the VIX yesterday marked its biggest two-day gain in almost two months, rising from the lowest since August. About 6.8 billion shares traded hands on U.S. exchanges Wednesday, 19 percent below the 2016 average.

Health-Care, Energy

Eight of the S&P 500’s 10 main industries rose today, with health-care and energy stocks jumping at least 2.1 percent. Drug companies were the strongest performers, with Amgen Inc. and Celgene Corp. gaining at least 4.4 percent. Vertex Pharmaceuticals Inc. soared 8.5 percent, while Merck & Co. rose 2.6 percent to a seven-month high. The Nasdaq Biotechnology Index surged 6 percent, the biggest increase since 2011.

West Texas Intermediate crude climbed 5.2 percent, sending energy producers to their strongest advance since March 11. Chevron Corp. added 2.3 percent and Apache Corp. rose 5.1 percent. Hess Corp. increased 5.4 percent to a four-month high.

The S&P 500’s rebound from a nearly two-year low in February had shown signs of waning in tepid trading volume as investors consider whether efforts by central banks are potent enough to fend off slowing growth. The index’s drop Tuesday ended a streak of 15 days without a 1 percent daily move, the longest such period of relative calm since March 2015.

Rate Bets

Following Fed Chair Janet Yellen’s reiteration that future rate increases will be gradual and the latest meeting minutes, traders are pricing in no possibility of an April hike. December is now the first month with at least even odds of a boost in borrowing costs.

Investors are also awaiting the earnings season for fresh evidence on the health of corporate America. Alcoa Inc. unofficially kicks off the reporting period when it releases first-quarter results on April 11. Analysts estimate profit at S&P 500 firms fell 9.5 percent during the period, compared with forecasts for flat earnings growth at the start of the year.

“We’re definitely in the wait and see approach right now on a couple things,” Joe Sowin, head of global equity trading at Dallas, Texas-based Highland Capital Management LP, said by phone. “First, we’re still waiting for any type of central bank updates and the second thing is earnings. Earnings is interesting because companies have lowered the bar immensely and that probably sets you up for a rally as the hurdle they need to jump is very low.”

Among other S&P 500 industries, consumer discretionary, raw-materials and technology shares all rose more than 0.8 percent. An S&P gauge of homebuilders rose 2.1 percent, with PulteGroup Inc. and D.R. Horton Inc. up at least 2.4 percent. Amazon.com Inc.’s 2.7 percent gain, the steepest in a month, was the consumer group’s biggest boost as the online retailer erased a two-day decline.

EBay Inc. added 4.3 percent, the strongest climb since October to lead the technology group. Cisco Systems Inc. rose 1.5 percent, after falling nearly 4 percent in the prior two sessions, and Facebook Inc. advanced 1.3 percent.

Banks also rebounded from the worst selloff in almost a month, with KeyCorp up 1.8 percent and Wells Fargo & Co. increasing 1.2 percent.

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