NEW YORK -- The Standard & Poor's 500 Index rose Wednesday as optimism that the Federal Reserve will continue to boost the U.S. economy overshadowed a drop in Internet stocks led by Yahoo and Groupon.
Electronic Arts 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 filed for a U.S. initial public offering.
The S&P 500 closed Wednesday's regular trading up 0.6 percent to 1,878.21, rebounding after briefly dropping earlier in the session below its average trading level for the past 50 days. The Nasdaq composite index slipped 0.3 percent, paring
a earlier drop of 1.5 percent. The Dow Jones industrial average climbed 117.52 points, or 0.7 percent, to 16,518.54. About 7.1 billion shares changed hands on U.S. exchanges, 6.1 percent above the three-month average.
"The U.S. market is showing remarkable resilience," said Irwin Michael, fund manager at ABC Funds in Toronto. His firm manages about C$900 million ($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 Wednesday.
"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."
Technology stocks led this year's selloff among companies whose growth are more tied to economic swings after a rally drove valuations to about double that of the S&P 500. The Nasdaq composite index is trading at 35 times reported earnings, compared with a multiple of 17.2 for the S&P 500.
The Dow Jones Internet composite index extended Tuesday's 3 percent decline that was led by an 18 percent plunge in Twitter. Groupon, which operates a website offering daily deals, dropped 21 percent to $5.33 on Wednesday, the lowest level in more than a year. For the second quarter, the Chicago-based company forecast $725 million to $775 million in revenue and adjusted earnings of zero to 2 cents a share. Analysts estimated sales of $754.4 million and an adjusted profit of 3 cents a share.
Twitter declined 3.7 percent to $30.66.
Yahoo tumbled 6.6 percent to $34.07. Alibaba, a Chinese online marketplace valued at $168 billion, filed Tuesday for its U.S. initial public offering, without specifying the number or price of shares it will sell or what valuation it will seek. Agreements between the two companies will force Yahoo to sell part of its 22.6 percent stake in Alibaba.
FireEye and Zulily are among the biggest losers in the Russell 1000 index after reporting results that disappointed investors. FireEye slumped 23 percent to $28.65. The company, which specializes in detecting computer network threats, forecast a loss of at least 58 cents a share in the second quarter. That's wider than the average 52-cent shortfall estimated by analysts.
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 tumbled 21 percent to $34.85. The owner of the Huffington Post and TechCrunch reported earnings that missed analysts' estimates as higher spending to attract an audience for advertisers squeezed its profit margin in the first quarter.
"You're seeing a brutal shift from growth and momentum investing to more value-based investing," Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees more than $150 billion, said in a phone interview from Florham Park, New Jersey. "The momentum stocks are ridiculously overvalued, but nonetheless, the overall broader market is fairly valued."
The Chicago Board Options Exchange volatility index, a gauge for U.S. stock volatility known as the VIX, slipped 2.9 percent Wednesday to 13.40.
Utility stocks rose 1.6 percent for the best gain among 10 S&P 500 main industries. Financial shares climbed 1.3 percent, rebounding from Tuesday's slump, as American Express and Visa added at least 1.6 percent.
Electronic Arts jumped 21 percent, the largest advance since 1990, to $33.95. Fiscal fourth-quarter profit of 48 cents a share and sales of $914 million exceeded projections. The company's FIFA 14, Titanfall and Battlefield 4 games were three of the top five best-selling titles across all game consoles in the United States, Canada and Europe, Chief Financial Officer Blake Jorgensen said.
Mondelez International, which makes Oreo cookies and Trident gum, rallied 8.2 percent to $38.10. The company will combine its coffee unit with D.E Master Blenders 1753 BV's, according to a joint statement Wednesday. Mondelez will receive cash of $5 billion and a 49 percent stake in the new company, to be called Jacobs Douwe Egberts. Separately, Mondelez reported first quarter earnings of 39 cents a share, more than the 35 cents projected by analysts.
Humana led health insurers higher after reporting profit that beat analysts' estimates. The stock climbed 8.4 percent to $119.05. UnitedHealth Group, the biggest U.S. health insurer, advanced 3.5 percent to $77.91 for the biggest gain in the Dow.
Chesapeake Energy rose 4.4 percent to $29.61. The company raised its full-year estimate of cash flow as CEO Doug Lawler's cost cuts take hold.
The company is on track to make more cash than it spends for the first time since 2001.
Whole Foods Market slumped 19 percent, the most in the S&P 500, to $38.93 after profit growth stalled and the natural-goods grocer cut its forecast amid increasing competition from traditional supermarkets and other organic-food sellers.