Dow, S&P inch up as growth questioned

Stocks that outperform in a weak economy helped the Dow and S&P 500 eke out gains yesterday as concerns about faltering growth and inflation prompted investors to seek out less volatile names. The Dow industrials’ top percentage gainers were Coca-Cola Co, up 1.5 per cent, Kraft Foods Inc, up 1.7 per cent and Merck & Co, up 1.2 per cent. Energy shares also rallied as US crude oil futures gained more than one per cent to trade above US$108 a barrel.

The S&P 500 fell almost one per cent early but found support near 1,300, a level that attracted buying interest in early March. Failing to hold that level could trigger a test of the benchmark’s 2011 low near 1,257. Stocks have sagged lately as economists have lowered forecasts for US growth. A Reuters poll of economists showed 2011 gross domestic product forecasts fell to 2.9 per cent from 3.1 per cent.
“GDP forecasts are continuing to fall, so (bets on defensives) are a safety trade,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Adding to the bearish sentiment, Google Inc shares fell five per cent to below US$550 in extended trading after the company’s first-quarter profit fell short of Wall Street’s target as operating expenses surged. The Dow Jones industrial average rose 14.16 points, or 0.12 per cent, to end at 12,285.15. The Standard & Poor’s 500 gained 0.11 of a point, or 0.01 per cent, to 1,314.52. The Nasdaq Composite dropped 1.30 points, or 0.05 per cent, to 2,760.22. A Senate investigation of Goldman Sachs hurt the Wall Street giant and some of its peers, while an unexpected rise in jobless claims added to bearish sentiment that kept gains in check.

Goldman shares fell 2.7 per cent to US$155.79 and were a drag on the S&P financial sector index, which was down 0.9 per cent. Further weighing on financials, major housing lenders agreed late on Wednesday to costly fixes of their foreclosure practices as part of a settlement with US bank regulators that jumped ahead of a states’ probe. The KBW Banks Index dropped 1.1 per cent. Adding to the boost from the energy sector as oil prices rose, natural gas producer and pipeline company El Paso Corp said it will develop a shale oil field without a partner. El Paso shares jumped 5.5 per cent to US$18.26 to lead gains in the S&P energy sector index, which rose 0.6 per cent.

“Oil closed above US$108 so all the energy stocks rallied this afternoon,” Boockvar said. Supervalu Inc forecast fiscal-year earnings above Wall Street’s expectations after its quarterly profit fell less than feared. The supermarket operator’s shares shot up 16.9 per cent to US$10.61.

(Reuters)