Technology companies lead stocks higher after an early slide

Friday, February 1, 2019, Vol. 43, No. 5
The Associated Press

Stocks recovered from an early wobble Monday, lifting the benchmark S&P 500 to its fourth straight gain.

Technology companies led the broad move higher, outweighing losses in health care, materials and utilities stocks.

The market had gotten off to a weak start after the government reported that factory orders fell in November, but by midday major indexes had turned higher.

Investors remained focused on the latest batch of corporate earnings, including solid results from Clorox and Sysco. Google parent Alphabet posted results that topped Wall Street's estimates after the close of regular trading.

Concerns over slower economic growth overshadowed a mostly positive January for stocks, with solid company earnings helping to offset some of those fears.

"Earnings have surprised to the upside," said Quincy Krosby, chief market strategist at Prudential Financial. "That said, there is still a tug-of-war within the market as to whether or not the economy is in fact going to slow this quarter or beginning of next quarter."

The S&P 500 index rose 18.34 points, or 0.7 percent, to 2,724.87. The Dow Jones Industrial Average climbed 175.48 points, or 0.7 percent, to 25,239.37. The tech-heavy Nasdaq composite gained 83.67 points, or 1.2 percent, to 7,347.54.

The Russell 2000 index of smaller companies picked up 15.48 points, or 1 percent, to 1,517.54.

Stocks got off to a sluggish start as traders weighed a government report showing U.S. factory orders declined 0.6 percent in November. The drop, attributed mainly to lower demand for machinery and electrical equipment, surprised economists, who had forecast a slight increase.

The report is one of many that were delayed by a monthlong government shutdown. The long list of missing indicators makes it difficult to gauge the health of the economy and has prompted a cautious outlook from analysts.

Traders shrugged off the possible implications of the report by midday, however, as their attention turned back to company earnings.

Clorox Company climbed 5.7 percent to $158.38 after reporting earnings that came in ahead of analysts' forecasts. Sysco's latest quarterly snapshot also topped analysts' estimates, driving shares in the food distributor up 4.8 percent to $66.64.

Just under half of S&P 500 companies have reported results for the last three months of 2018. Of those, about 71 percent have turned in results that exceeded financial analysts' forecasts, according to S&P Global Market Intelligence.

In addition to positive earnings, the market has been riding a wave of positive momentum kicked off last week when the Federal Reserve signaled that it sees no need to raise interest rates anytime soon. Another batch of strong monthly U.S. jobs data also helped put investors in a buying mood.

"The Fed put the market on notice that they are becoming more patient, more flexible, more data-dependent, and that's certainly helped underpin the market's performance," Krosby said.

Even so, uncertainty remains over the U.S.-China trade dispute, and its potential impact on corporate profits. Washington and Beijing ended two days of talks last week in Washington without a deal, though both sides remained optimistic about future meetings. Investors hope a deal is reached before a tariff cease-fire ends on March 2.

Papa John's jumped 9 percent to $41.97 on news of a $200 investment from Starboard Value. Starboard CEO Steve Ritchie is also being named chairman of the troubled pizza chain.

Last week, the Louisville, Kentucky-based company's stock plunged on reports that Trian Fund Management was no longer interested in a deal. The company also had a weak fourth quarter.

Gannett, the publisher of USA Today and other newspapers, slid 2.2 percent to $10.97 after the company rejected a $1.36 billion buyout from MNG Enterprises, a hedge-fund backed media group with a history of taking over newspapers and slashing jobs.

Health care sector stocks lagged the broader market. Allergan slid 3.8 percent to $138.53, while Celgene lost 2.3 percent to $87.57.

U.S. crude fell 1.3 percent to settle at $54.56 per barrel in New York. Brent crude, used to price international oils, slipped 0.4 percent to close at $62.51 per barrel in London. The lower prices follow a round of supply cuts by OPEC in January and more U.S. sanctions against Venezuela.

Bond prices fell. The yield on the 10-year Treasury rose to 2.72 percent from 2.69 percent late Friday.

The dollar strengthened to 109.90 yen from 109.51 yen on Friday. The euro weakened versus the dollar to $1.1432 from $1.1461.

Gold fell 0.2 percent to $1,314.30 an ounce. Silver lost 0.3 percent to $15.89 an ounce. Copper gained 0.8 percent to $2.79 a pound.

In other energy futures trading, wholesale gasoline fell 0.3 percent to $1.43 a gallon. Heating oil slid 0.3 percent to $1.91 a gallon. Natural gas dropped 2.7 percent to $2.66 per 1,000 cubic feet.