Stocks little changed as Fed offsets economy data
NEW YORK - U.S. stocks were little changed Wednesday as data showing better-than-forecast economic growth was offset by weaker earnings and the Federal Reserve's decision to keep trimming asset purchases.
Genworth Financial Inc. declined 14 percent, the most since November, after the insurer said it was reviewing whether enough funds had been set aside for claims. Public Service Enterprise Group Inc. led a 1.7 percent retreat among utilties after earnings trailed estimates. Twitter Inc. soared 20 percent as World Cup-related demand helped the microblogging company double revenue. Amgen Inc. and Regeneron Pharmaceuticals Inc. led a rally in biotechnology shares.
The Standard & Poor's 500 Index climbed less than 0.1 percent to 1,970.07 as of 4 p.m. in New York. The Dow Jones Industrial Average slid 31.75 points, or 0.2 percent, to 16,880.36. The Nasdaq 100 Index increased 0.4 percent.
"The GDP print this morning had given the market some pause as to how hawkish the Fed might be," Stacey Nutt, chief investment officer at ClariVest Asset Management LLC in San Diego, California, said in an interview. His firm oversees about $4 billion. "Now it seems like they were not as hawkish as feared."
Wednesday's Commerce Department report showed 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. Consumers, whose spending accounts for 70 percent of the economy, have grown more confident as the labor market improves and rising share prices boost wealth.
Policy makers tapered monthly bond buying to $25 billion in their sixth consecutive $10-billion cut, staying on pace to end the purchase program in October. Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal.
Gross domestic product rose at a 4 percent annualized rate after shrinking 2.1 percent from January through March, Commerce Department figures showed. The median forecast of 80 economists surveyed by Bloomberg called for a 3 percent advance.
"You're seeing some relief from the market that there is really no major surprise from the FOMC statement," Brad Friedlander, managing partner and co-founder of Atlanta-based Angel Oak Capital Advisors LLC, said in a phone interview. His firm oversees $4 billion. "The GDP number was important in building confidence."
Equity markets will see a decline at some point after surging for the past several years, according to former Federal Reserve Chairman Alan Greenspan.
"The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction," Greenspan, 88, said today in an interview on Bloomberg Television's "In the Loop" with Betty Liu. "Where that is, I do not know."
Pacific Investment Management Co.'s Bill Gross said investors should say "good evening" to the prospect of future capital gains in asset markets as interest rates are set to rise while the economy grows at a slow pace.
Genworth declined 14 percent to $14.06. Second-quarter operating profit was 31 cents a share, trailing the 36-cent average estimate of 10 analysts surveyed by Bloomberg, the insurer said in a statement late yesterday.
Utilities in the S&P 500 sank 1.7 percent, the biggest drop among the 10 main industries. Public Service Enterprise, which generates and distributes electricity, lost 2.6 percent after reporting lower-than-estimated profit.
Twitter surged 20 percent to $46.30. The company said active membership in the quarter reached 271 million, with year- over-year growth at 24 percent. Sales more than doubled to $312.2 million, exceeding the $282.8 million average estimate.
U.S. Steel Corp. gained 19 percent to $33.03, the biggest gain since 2008. The country's largest steelmaker by volume posted a surprise second-quarter profit and raised the amount of cost savings it expects to achieve in 2014.
The Nasdaq Biotechnology Index rose 1 percent. Amgen added 5.4 percent to $130.01. The world's biggest biotechnology company by sales reported higher-than-expected earnings driven by Enbrel, the company's top drug for arthritis. The company said it will cut more than 2,400 jobs through 2015 and close plants in two states.
Regeneron climbed 5.8 percent to $322.18. The company said the Food and Drug Administration approved its Eylea injection for the treatment of diabetic macular edema.
Edwards Lifesciences Corp. climbed 10 percent to $92.88. The biggest maker of heart valves that are inserted without cracking open the chest raised its 2014 forecast after second- quarter profit beat analysts' estimates on device demand.
DreamWorks Animation SKG Inc., the independent cartoon- movie studio, plunged 12 percent to $19.98. The company posted a second-quarter loss and said securities regulators are investigating a writedown.