The S&P; 500 fell 2.2 percent this week, trimming its gain for the year to 0.1 percent. Photo: AFP
US stocks gained as takeover speculation fueled a late-day rally in chipmakers, overshadowing comments by Federal Reserve Chair Janet Yellen that an interest-rate increase may be warranted this year. Treasuries rose and the dollar dropped for a second straight week. Oil slid.
The Standard & Poor's 500 Index climbed 0.2 percent at 4 p.m. in New York, trimming its worst weekly slide since January. Biotechnology shares rebounded from a four-day drop. The Stoxx Europe 600 Index rose 0.3 percent and the euro was little changed at $1.09. The yield on 10-year Treasuries slid four basis points to 1.95 percent. US oil sank more than 6 percent in extended trading and copper dropped from a two-month high.
Stocks rose late in the session after fluctuating for most of the day. Chipmakers led gains after the Wall Street Journal reported that Intel Corp. was in talks to buy Altera Corp., triggering a 2.8 percent surge in a gauge of chipmakers. Yellen said an interest rate increase may be warranted later this year and subsequent moves will be gradual without following a predictable path.
"The Intel news sparked the imagination of some and created a little bit of short-covering and the stock market pulled into positive territory," Yousef Abbasi, the global market strategist at JonesTrading Institutional Services LLC in New York, said by phone. "Yellen continues to be incredibly elusive, but delivering the right message for the markets. She admits the underlying economy is weak. She's tiptoeing both sides of the argument here."
Reports today showed the biggest gain in consumer spending in eight years fueled a 2.2 percent expansion in the US economy last quarter, while consumer confidence fell less than forecast in March, capping the best quarter since 2004.
GDP Report
Officials in the US are mulling tightening policy, harsh winter weather, a stronger dollar, a port slowdown and a global oil glut have translated into weaker-than-expected spending at the same time profits for S&P 500 companies are forecast to decline for the first time since 2009.
Altera's rally helped pare losses in the worst week for chip stocks since October. The Philadelphia Semiconductor Index rallied 2.8 percent on Friday, driven higher as Altera jumped to $44.39 from $34.58. Other companies posting gains of more than 5 percent were Skyworks Solutions Inc., Xilinx Inc. and Intel.
"It's about what these chipmaker companies are going to be valued at, so they're going to go higher," Thomas Garcia, the head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by phone. "They've gotten pretty beat up since the beginning of the year so if you're short the semiconductors you may think about covering here."
Weekly Drop
The S&P 500 fell 2.2 percent this week, trimming its gain for the year to 0.1 percent, after coming within 0.5 percent of its all-time high on March 20. The measure hasn't increased for two straight days since Feb. 17, the longest stretch since 1994.
The Nasdaq Composite Index, which came within 0.4 percent from its 2000 record, slumped 2.7 percent this week, the most since October. The index added 0.6 percent Friday as semiconductor and biotechnology companies rebounded.
Dow Chemical Co. jumped 1.9 percent after a deal to sell most of its chlorine business. Energy companies declined with oil prices, as Chevron Corp. and Exxon Mobil Corp. slipped about 0.9 percent.
Companies will see a 5.8 percent drop in earnings for the first three months of 2015, analyst estimates show. Alcoa Inc. unofficially kicks off the earnings season when it reports first-quarter results on April 8.
Dollar, Treasuries
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, was up 0.2 percent on Friday and down 0.3 percent this week. The gauge tumbled 2.2 percent last week, the biggest drop since October 2011, after the Fed revised forecasts for inflation and growth downward.
The benchmark 10-year note yield fell for the first time in three days. The rate rose two basis points this week after falling 31 basis points during the previous two weeks. The yields touched 1.85 percent March 25, the least since Feb. 6.
Haven demand for Treasuries increased Friday as Germany said it's yet to receive Greece's proposals for economic reforms, which are crucial to unlocking financial aid to the Mediterranean nation.
Greece, ECB
Greece aims to submit its reform commitments by March 30 with a view to euro-area finance ministers meeting to approve the list on April 1, a Greek Finance Ministry official said in Athens Friday. A meeting or call with creditor officials may have to take place during the weekend, the official said.
German two-year rates dropped as low as minus 0.256 percent, the lowest since Bloomberg began collecting the data in 1990.
ECB President Mario Draghi said on Thursday he's confident that his bond-buying program will hit its targets.
The ECB said that it had settled public-sector purchases of 26.3 billion euros ($28.5 billion) as of March 20 after starting a quantitative-easing program aiming to buy 1.1 trillion euros of public-sector bonds by September 2016. The ECB move helped send the euro down more than 10 percent against the dollar this quarter.
"Central banks are still a critical aspect of equities as an asset class," Ian Williams, a market strategist at Peel Hunt LLP in London, said by telephone. "We're at the point where the beneficial effects of QE have just started. It's showing up in the sentiment indicators, but it's not showing up in the hard economic data yet."
Oil, Yemen
The Stoxx 600 rebounded after its worst two-day slump since the start of January. Still, the gauge capped a 2.1 percent weekly decline, the biggest this year. That trimmed its quarterly gain to 15 percent.
West Texas Intermediate crude fell 6 percent to $48.35 a barrel in electronic trading, halting its longest run of daily gains in more than a month. Futures rose almost 6 percent this week. Brent oil slipped 5.3 percent, cutting its weekly gain to about 1.4 percent. The Norwegian krone weakened 0.6 percent to 7.96178 per dollar. Norway is western Europe's biggest oil producer.
Saudi jets bombed the capital of Yemen into the early morning hours on Friday, and strikes will continue "as long as necessary," said Ahmed Asseri, a spokesman for the Saudi-led coalition leading the campaign.
"While we've got no actual supply disruption it's pretty clear that the market is focused on the potential here, which is enormous," Michael McCarthy, a chief markets strategist at CMC Markets in Sydney, said by phone, referring to the situation in Yemen. "We're likely to see a further increase in volatility as the price reacts to developments."
Gold declined, ending the longest rally since 2012, as crude oil fell and investors exited funds backed by the metal. Prices slipped 0.4 percent to $1,200.13 an ounce.
