US: Stocks rebound from selloff as biotechs, chipmakers rally

[NEW YORK] US stocks rose, with the Standard & Poor's 500 Index paring a weekly loss, as Gilead Sciences Inc and Expedia Inc rallied after Thursday's selloff in biotechnology and small-cap shares.

The Nasdaq Biotechnology Index rebounded 2.9 per cent from a 3.1 per cent drop yesterday. Gilead added 4.5 per cent as first- quarter profit exceeded projections. Expedia Inc climbed 7.9 per cent, amid quarterly revenue that exceeded estimates, and paced consumer shares as they erased their Thursday decline. LinkedIn Corp tumbled 19 per cent after trimming its annual sales forecast.

The S&P 500 gained 1.1 per cent to 2,108.29 at 4 pm in New York, after falling 1 per cent Thursday. The index jumped above its average price for the past 50 days. The Russell 2000 rose 0.7 per cent after tumbling 2.2 per cent yesterday. The Dow Jones Industrial Average climbed 183.54 points, or 1 per cent, to 18,024.06 and nearly wiped out yesterday's retreat.

"This week felt like an unwinding of a lot of big trading positions that had been on for months and that had been extremely successful," said David Heidel, a regional investment director for the private client reserve of US Bank, which oversees about US$128 billion of assets. "This is a rebound from the tough days we had earlier this week. People are taking a look at potential bargains." The benchmark index dropped 0.4 per cent this week as the Federal Reserve left open the possibility of raising rates in 2015 even after data showed the economy barely grew in the first quarter.

Wednesday's growth report was among a string of weak numbers stoking concern about the strength of the recovery, as the Fed looks set for its first rate increase since 2006.

A report today showed manufacturing in April held at the weakest pace in almost two years, while a separate report said consumer confidence increased in April to the second-highest level in more than eight years as Americans grew more upbeat about their financial prospects.

Analysts have tempered their predictions for a corporate earnings slump, now projecting a first-quarter drop of 0.4 per cent, compared with April 17 calls for a 4.3 per cent decline.

The Russell 2000 Index lost 2.6 per cent last month as biotech and social-media companies, viewed by some investors as being in bubble territory, led a late April retreat in equities.

While the S&P 500 returned to an all-time high in April and the Nasdaq Composite Index jumped to its first record since the dot-com bust, this week's declines have pulled both indexes away from those levels. The S&P 500 is still one of the biggest laggards among developed-market indexes this year.

"Markets are becoming increasingly tactical and taking profits," said Michael Ingram, a market strategist at BGC Brokers LP in London. "The very basic issue is that markets want strong growth and zero rates forever. That's simply not going to happen." Amid the volatility, US equities remain stuck within the tightest range of prices in almost a decade: roughly 125 points in the S&P 500. The peak-to-trough move of 6.3 per cent is the smallest at this point of any year since 2006.

The Chicago Board Options Exchange Volatility Index dropped 13 per cent to 12.70 after an 8.7 per cent jump yesterday. For the gauge known as the VIX, it's the biggest retreat since January. About 6.4 billion shares changed hands on US exchanges Friday, 3 per cent below the three month average.

Nine of the S&P 500's 10 main groups rose Friday, with raw- material, technology and consumer discretionary companies rallying the most. Alcoa Inc. jumped 5.4 per cent, its biggest gain since October, and Eastman Chemical Co. added 3.3 per cent near a five-month high to lead materials. Alcoa was upgraded to buy from hold at Standpoint Research.

Expedia led gains in consumer shares along with Yum! Brands Inc and Leggett & Platt Inc. Yum surged 6.9 per cent, the biggest gain in more than a year, after after Dan Loeb's Third Point disclosed a "significant stake" in the restaurant operator, saying its business in China will recover from recent food-safety issues.

Gilead, Biogen Inc. and Regeneron Pharmaceuticals Inc. paced health-care's advance, with each rising at least 3 per cent. The Nasdaq Biotech index added 2.9 per cent, snapping a five-day losing streak during which the gauge dropped 9 per cent.

A Bloomberg gauge of US airlines climbed 3 per cent. SkyWest Inc. soared 18 per cent after better-than-estimated first-quarter results. JetBlue Airways Corp. and Southwest Airlines Co. rose more than 5 per cent.

Altera Corp. rallied 9.8 per cent after Reuters reported that the company could face a hostile takeover bid by Intel Corp Intel added 2.7 per cent and Micron Technology Inc. advanced 3.1 per cent. The Philadelphia Stock Exchange Semiconductor Index increased 2.8 per cent, its best gain since March 27 when Intel's initial interest in Altera was first reported.

Apple Inc rose 3 per cent, ending a three-day losing stretch in which shares fell 5.7 per cent.

LinkedIn lost 19 per cent, the sharpest drop since it went public almost four years ago. The professional-networking website delivered quarterly revenue that missed analysts' estimates for the first time, shaking confidence in a historically stable business plan. The company also trimmed its annual revenue forecast.

First Solar Inc, the biggest US solar-panel maker, slipped 3.9 per cent to its lowest level in two months. Quarterly revenue missed estimates, and the company reported its first loss in three years as it prepares to create a new company to operate some of its completed power plants.

Pump and valve maker Flowserve Corp dropped 3.2 per cent, the most in three months, after first-quarter profit and revenue missed estimates. The company cited broad-based industrial spending declines, notably in oil and gas markets, and the impact of a strengthening dollar.

Chevron Corp fell 1.8 per cent, the most among three Dow components that declined, after reporting better-than-estimated quarterly earnings. Profit from its refinery business doubled, while earnings from its oil-and gas-producing business posted the worst performance since the second quarter of 2009.

BLOOMBERG