NEW YORK: The Standard & Poor’s 500 Index rose as optimism that the Federal Reserve will continue to support the U.S. economy overshadowed a drop in Internet stocks led by Yahoo! Inc. and Groupon Inc.
Electronic Arts Inc. jumped 21 percent after reporting better-than-forecast results. The Dow Jones Internet composite index dropped 1.9 percent to the lowest level since October. Groupon fell 21 percent as sales and profit projections trailed some estimates. Yahoo slumped 6.6 percent as Alibaba Group Holding Ltd. filed for a U.S. initial public offering. Tesla Motors Inc. dropped 5.8 percent in after-market trading.
The S&P 500 gained 0.6 percent to 1,878.21, rebounding after briefly dropping below its average trading level for the past 50 days. The Nasdaq composite index slipped 0.3 percent, paring an earlier drop of 1.5 percent. The Dow Jones industrial average climbed 117.52 points, or 0.7 percent, to 16,518.54.
“The U.S. market is showing remarkable resilience,” said Irwin Michael, fund manager at ABC Funds in Toronto. His firm manages about $826 million. “Clearly the economy is slowly but surely improving, and whatever the Fed is doing or not doing, it’s helpful that nobody is rocking the boat. The high-tech stocks are still troublesome for a lot of people. It’s not a straight line and there’s still some confusion out there.”
The Fed must continue to spur economic growth as indicators for inflation and employment remain far from the central bank’s goals, Chair Janet Yellen said Wednesday. “A high degree of monetary accommodation remains warranted,” she said in testimony prepared for delivery to the Joint Economic Committee of Congress.
The Federal Open Market Committee last week pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely as the economy improves.
While some areas of the equity market show signs of over-valuations, the broad market hasn’t developed a bubble, Yellen said.
“There are pockets where we could potentially see misvaluations in smaller-cap stocks,” she said. “Overall those broad metrics don’t suggest that we are in obviously bubble territory. We don’t have targets for equity prices and can’t detect if we’re in a bubble with certainty.”
Zulily tumbled 30 percent to $32.28. The online retailer reported a loss of 2 cents a share in the first quarter. Analysts had expected the company to break even.
AOL Inc. tumbled 21 percent to $34.85. The owner of the Huffington Post and TechCrunch reported earnings that missed analysts’ estimates.