U.S. Stocks Fluctuate as Energy Retreat Offsets Services Data

U.S. stocks fluctuated, after the biggest two-day rally in almost a month, as declines in pharmaceutical and energy companies offset data showing an expansion in service industries.
Gilead Sciences Inc. retreated 9.4 percent after saying discounts for its blockbuster hepatitis C drugs will weigh on revenue this year. Merck & Co. fell 2.7 percent after saying 2015 adjusted earnings and sales will be below analyst estimates. EOG Resources Inc. paced declines among energy shares as crude lost more than 3 percent after its biggest four-day rally since 2009.
The Standard & Poor’s 500 Index slid 0.2 percent to 2,046.23 at 10:12 a.m. in New York. The gauge rallied 2.8 percent in the past two days, helped by a surge in energy stocks, and closed 1.9 percent away from a record high. The Dow Jones Industrial Average rose 34.10 points, or 0.2 percent, to 17,700.50.
“What these ups and downs point to is the bigger story of the return of volatility,” Dan Farley, regional investment director for The Private Client Reserve at U.S. Bank Wealth Management in Minneapolis, said by phone. “We had a pretty sanguine two years and you forget that stocks can move around quite a bit.”

Economic Data

An ADP Research Institute report showed companies added 213,000 workers in January, below economists’ forecast of 223,000. The data comes before Friday’s jobs report from the Labor Department, which economists predict will show nonfarm payrolls increased 231,000 last month, while the unemployment rate remained at 5.6 percent.
The Institute for Supply Management’s non-manufacturing index expanded at a faster pace in January, a sign of progress in the biggest part of the economy that will help the U.S. work through a global slowdown. The index rose to 56.7 from a six-month low of 56.5 in December. Figures above 50 signal expansion.
The rebound in the last two days trimmed the S&P 500’s drop to 0.4 percent for 2015. In January, the index posted its worst month in a year as concern mounted that slowing growth overseas will hurt the American economy, while the plunge in crude oil and stronger dollar have shown signs of eroding corporate profits. To add to the volatility, the Swiss National Bank said it would abandon its cap against the euro, roiling markets globally.
The political situation in Greece continues to bring concerns as anti-austerity party Syriza is negotiating new terms on repaying its debt. Demand slumped to a more than eight-year low at a sale of Greek Treasury bills on Wednesday.

Corporate Earnings

Investors have also been scrutinizing corporate earnings. About 78 percent of S&P 500 companies that have posted results this season have beaten analyst estimates, while 54 percent have topped sales projections, data compiled by Bloomberg show.
Yum! Brands Inc. and 21st Century Fox Inc. are among 29 S&P 500 companies reporting earnings on Wednesday.
Among other companies moving on earnings, Chipotle Mexican Grill lost 6.7 percent after posting fourth-quarter same-store sales that trailed analysts’ estimates and saying that higher food costs slowed profit gains.
General Motors Co. climbed 3.4 percent after reporting quarterly profit that beat projections and raising its dividend.
Walt Disney Co. rallied 6.5 percent and Whirlpool Corp. gained 5.2 percent after the companies posted quarterly earnings and revenue that beat projections.
Health-care and energy companies were down more than 1.5 percent as six of the S&P 500’s 10 main groups fell.
Staples Inc. slipped 8.7 percent after agreeing to buy Office Depot Inc. for about $11 a share. The stocks jumped on Tuesday after the two retailers were said to enter merger talks.

Source: Bloomberg –By Inyoung Hwang and Oliver Renick