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Tech rally offsets global growth concern in US stocks

NEW YORK -- U.S. stocks rose Tuesday with the Nasdaq 100 index rallying as gains from Apple to Netflix helped offset concerns that global growth is slowing.

Yahoo!, Micron Technology and Apple jumped more than 2.3 percent to lead technology shares. Netflix surged 13 percent in late trading after adding more subscribers than analysts forecast. Delta Air Lines climbed 7.3 percent after earnings beat projections. Johnson & Johnson tumbled 2.6 percent after forecasting lower earnings in 2015 as competition cuts into revenue for some of its best-selling drugs. A gauge of homebuilders retreated 3 percent, after plunging almost 7 percent last week.

The Standard & Poor's 500 index gained 0.2 percent to 2,022.55, after an earlier decline of 0.7 percent. The Dow Jones industrial average added 3.66 points, or less than 0.1 percent, to 17,515.23. The Nasdaq 100 index gained 0.7 percent. About 7.3 billion shares changed hands on U.S. exchanges Tuesday, 8.2 percent above the three-month average. Exchanges were closed Monday for Martin Luther King Day.

"Volatility has been so pronounced day-to-day, hour-to- hour," Richard Sichel, chief investment officer at Philadelphia Trust, which oversees $2 billion, said in a phone interview. "The fact that the market is marginally positive is encouraging given all the elements that are out there."

The S&P 500 slipped 1.2 percent last week, even with a 1.3 percent rally on Friday, as falling oil, shrinking earnings estimates and concern that slowing global growth will hurt the U.S. economy led to selling. The index is down 1.8 percent for the year.

The International Monetary Fund made the steepest cut to its global-growth outlook in three years, with diminished expectations almost everywhere except the U.S. more than offsetting the boost to expansion from lower oil prices.

The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the IMF said in its quarterly global outlook released late Monday. It also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October.

"Although the theme is that the U.S. is the best market out there, from a global perspective, you can't see a slowdown in every country and expect the U.S. to stay above water," Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer's Investment Research, said in a phone interview.

The global weakness, along with prolonged below-target inflation, is challenging policy makers across Europe and Asia to come up with fresh ways to stimulate demand more than six years after the global financial crisis.

The ECB sets monetary policy this week as speculation grows that it will expand asset purchases. President Mario Draghi will probably announce a 550 billion-euro ($638 billion) program of quantitative easing, economists said in a Bloomberg survey.

"The market is a little oversold here after a pretty wild January so far," Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird, which oversees $110 billion, said in a phone interview. "If the ECB comes through with a strong quantitative easing strategy, that may be able to pull Europe away from the edge in terms of recession and deflation, which would ease concerns that the U.S. would succumb to slower growth as well."

China's economic growth beat economists' estimates last quarter, helping the full-year expansion remain close to the government's target. Gross domestic product rose 7.3 percent in the three months ended December from a year earlier, the statistics bureau said in Beijing, beating the median estimate of 7.2 percent in a Bloomberg survey of analysts. The economy expanded 7.4 percent in 2014, the slowest pace since 1990.

Later this week, investors will weigh U.S. economic reports including data on housing and manufacturing to gauge the health of the world's largest economy.

Netflix rose 3.4 percent during the regular session and then surged 13 percent in late trading after reporting fourth- quarter subscriber growth that exceeded its forecasts, benefiting from faster international growth and more gains in the U.S.

Bank of America strategists lowered their estimate for S&P 500 earnings for a second time. The forecast was cut "in order to reflect lower oil and the stronger dollar," according to the BofA Merrill Lynch Global Research report.

Earnings per share for companies in the gauge will expand 1 percent in 2015 to $119.50, down from $124 previously and an earlier prediction of $126. The mean estimate among 18 strategists surveyed by Bloomberg was $124.83 as of Jan. 5.

The Chicago Board Options Exchange volatility index, known as the VIX, fell for a second straight day, declining 5.1 percent to 19.89.

Seven out of 10 major groups in the S&P 500 rose Tuesday. Technology and industrial shares had the biggest advance, adding at least 0.7 percent.

Delta rose 7.3 percent, the most since September 2013, as fourth-quarter profit beat analysts' estimates, boosted by cheap fuel and strong demand in the U.S.

Carriers from Southwest Airlines to American Airlines Group rallied, sending the Dow Jones transportation average to a 1 percent gain.

Johnson & Johnson, the world's biggest maker of health-care products, tumbled 2.6 percent. The company is seeking to replenish its product lineup as drugs such as hepatitis C treatment Olysio and blood thinner Xarelto face new competition.

Jami Rubin, an analyst at Goldman Sachs, lowered her recommendation to sell from neutral on Jan. 15 because she sees the company bringing fewer new drugs to market this year than in previous years, she said in a note.

Morgan Stanley lost 0.4 percent. The owner of the world's largest brokerage reported profit that missed analysts' estimates as fixed-income trading revenue fell to the lowest since the financial crisis.

Financial companies are the worst-performing group in the S&P 500 so far this year, dropping 5.4 percent. Energy companies have the second-biggest decline, at 4.6 percent.

JPMorgan Chase and Citigroup Inc. posted earnings last week that missed analysts' estimates on bigger-than- expected drops in fixed-income trading revenue. Goldman Sachs posted its lowest full-year trading revenue since 2005.

An S&P index of homebuilders decreased 3 percent as PulteGroup, D.R. Horton and KB Home fell more than 3.4 percent.

With assistance from Jonathan Morgan in Frankfurt.

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