S&P 500 extends record as small caps fall

Bloomberg NewsMay 31, 2014 

NEW YORK -- U.S. stocks rose Friday, with benchmark indexes climbing to records, as utility and consumer-staple shares rallied and investors weighed data showing an uneven recovery in the American economy.

Wal-Mart Stores and Lorillard climbed at least 1 percent, pacing gains among companies whose earnings are less tied to economic swings. U.S. Steel dropped 4.6 percent to lead losses among commodities producers. Lions Gate Entertainment dropped 12 percent after quarterly results missed estimates.

The Standard and Poor's 500 index added 0.2 percent to 1,923.57, bringing its gain in the holiday-shortened week to 1.2 percent. The Dow Jones industrial average rose 18.43 points, or 0.1 percent, to 16,717.17, surpassing its previous record from May 13.

"The outlook for the market for the rest of the year remains constructive," Sam Wardwell, an investment strategist at Pioneer Investments in Boston, said in a phone interview. His firm manages about $249

billion globally. "It's not so much we don't have a belief where the market is going, we just don't know what route it's going to take to get there."

Small-cap and technology companies produced losses Friday, halting a recovery from a selloff that began in early March. The Russell 2000 index slipped 0.5 percent, trimming its weekly gain to 0.7 percent. The Nasdaq composite index lost 0.1 percent, paring its gain this week to 1.4 percent.

The Chicago Board Options Exchange volatility index, a gauge of options prices known as VIX, slipped 1.5 percent to 11.40 on Friday. The measure closed for a fifth straight day below 12, the longest stretch since February 2007, data compiled by Bloomberg show.

"The market is almost trading directionally sideways," Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management in Parsippany, New Jersey, said in a phone interview. His firm oversees more than $600 million. "There is no volatility and investors are waiting for the next signal whether they put more in or take more out.'

Eight of 10 main industries in the S&P 500 advanced Friday. Consumer-staples and utility stocks rose the most, adding more than 0.7 percent. Wal-Mart, a discount retailer, increased 1 percent to $76.77. Lorillard, a cigarette maker, rallied 3.2 percent to $62.17.

Commodity shares were the only groups to decline, as oil and copper prices fell. U.S. Steel slipped 4.6 percent to $23.04 for the biggest retreat in the S&P 500.

About 6 billion shares changed hands on U.S. exchanges, the busiest trading in two weeks.

The S&P 500 has rebounded 5.9 percent since the selloff in small-cap and Internet shares spread to the broader market and dragged the gauge to a two-month low in April. It advanced 2.1 percent in May for a fourth consecutive monthly increase, and is up 4.1 percent this year.

The gauge closed at a record Thursday, shrugging off a report showing the U.S. economy contracted for the first time in three years from January through March.

Data showed Friday that consumer spending unexpectedly fell in April after the biggest surge in almost five years as incomes slowed. Consumer confidence in the world's largest economy fell more than forecast in May, a sign consumer spending may be slow to pick up in the second quarter, according to the Thomson Reuters/University of Michigan final index of sentiment.

Business activity in the Chicago area expanded in May for a thirteenth straight month. The business barometer of the Institute for Supply Management-Chicago rose to 65.5 in May from 63 a month earlier, according to a report Friday. A reading above than 50 signals expansion.

Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll. Central-bank stimulus has helped propel the S&P 500 higher by 184 percent from its bear-market low in March 2009. The gauge now trades at 16.3 times the projected earnings of its members, up from a multiple of 14.8 times four months ago.

Lions Gate, the studio behind "The Hunger Games" movies, slipped 12 percent to $26.13. Revenue fell 8.1 percent to $721.9 million for the quarter through March 31, the company said. Analysts had predicted $823.7 million on average. Adjusted earnings per share were 42 cents, also missing the 43-cent average estimate.

Express lost 7.5 percent to $12.61. The retailer predicted earnings of 74 cents to 90 cents a share this year, down from a previous forecast of as much as $1.23. First-quarter profit fell to 6 cents a share, missing estimates.

Infoblox sank 37 percent to $12.96. CEO Robert Thomas will leave after almost a decade at the network and data-services provider, according to a statement. Profit for the 12 months ending July 31 will be as much as 32 cents per share, down from a previous forecast for as much as 34 cents. Sales will probably not exceed $246 million, less than the $252.6 million average analyst estimate.

With assistance from Bloomberg's Sofia Horta e Costa in London.

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