By Corrie Driebusch
The Nasdaq Composite rose to a new record close Wednesday, as
technology companies led major benchmarks higher one day after
their biggest losses in weeks.
Information technology stocks, which sustained some of the
biggest losses Tuesday, pulled ahead on Wednesday. A midday report
by The Wall Street Journal that Broadcom Corp. is in advanced talks
to be bought by Avago Technologies Ltd. boosted the technology
sector, in particular semiconductor companies. The lift helped the
Nasdaq Composite Index push above its previous record close, ending
up 73.84 points, or 1.5%, at 5106.59. So far this year the Nasdaq
Composite is up 7.8%.
The Dow Jones Industrial Average gained 121.45 points, or 0.7%,
to 18162.99, rebounding from a tumble of 1% on Tuesday, its biggest
one-day rout since April 30. The S&P 500 added 19.28 points, or
0.9%, to 2123.48.
"Today you have news that is impacting the fundamentals of
companies," said Tom Digenan, head of U.S. equities at UBS Global
Asset Management, referring to the reported Avago and Broadcom
deal. "But Greece, the Fed, Europe in general, these macro factors
aren't going to go away."
Technology stocks in the S&P 500 rose 1.8%, making
Information Technology the best performing sector in the index.
Broadcom's shares ended up 22%, while Avago added 7.8%.
Although major benchmarks ended sharply higher, not all
industries benefited from the broad gains.
Retailers, particularly those in the luxury segment, mostly
declined, weighed down by quarterly results from Michael Kors
Holdings Ltd. The retailer's shares tumbled 24% after it reported
falling sales from a drop in tourist spending and the company's
watch business. Fossil Group Inc., which makes watches for Michael
Kors and other fashion brands, also fell 6.5%. Competitors also saw
their shares drop, with Coach Inc. declining 3.3% and Kate Spade
& Co. shares off 4.7%.
With Wednesday's gains major benchmarks regained most of the
losses incurred on Tuesday. Investors blamed Tuesday's rout in part
on mixed economic data as well as on worries about Greece and its
approaching debt payments. Some data indicated that the U.S.
economy may be improving after hitting a soft patch in the first
quarter. Though that is good news for the economy, it helps
solidify expectations for a federal rate increase later this year,
which some investors worry may hurt stock performance.
"There is the marginal buyer who thinks there will not be a rate
increase in 2015 who periodically gets spooked, and that's what we
saw yesterday," said Tim Knepp, chief wealth officer for LPL
Financial.
Developments in Greece also calmed investors, traders said.
Greece and its creditors started to draft a final agreement on
Wednesday, sending European stocks higher. However, The Wall Street
Journal reported that one European Union official is doubtful of
Greece's ability to close a deal quickly. Germany's DAX gained 1.3%
and France's CAC 40 added 2%.
As trading for the month of May winds down this week, investors
will have even more data to focus on, including Friday's revised
reading of first-quarter gross domestic product.
The initial reading of first-quarter GDP showed the U.S. economy
slowed dramatically, growing at a sluggish 0.2%. Economists
surveyed by The Wall Street Journal expect that to be revised
downward to a 1% contraction in Friday's revised reading.
Heading into the summer months, volatility, which had been muted
throughout the past week, could pick up, some traders say. With
fewer investors buying and selling shares in the summer months,
swings in the market could be more exaggerated.
"The summer is always tricky because we lose trading volume,"
said Jennifer Ellison, principal at San Francisco-based wealth
management firm Bingham Osborn & Scarborough, which manages
about $3.5 billion. "You can have stronger reactions to what's
going on in the market. It's hard to predict what will happen."
In commodity markets, gold futures slipped 0.1% to $1185.90 an
ounce. Crude-oil futures fell 0.9% to $57.51 a barrel.
The yield on the 10-year Treasury note was at 2.137%, compared
with 2.135% on Tuesday. Yields fall as prices rise.
Stephanie Yang contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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