Wall Street rebounds on strong US retail data

Data eases concerns that economic growth might be slowing in the US

US stocks rose on Tuesday, erasing much of the previous session's steep drop, as a strong December retail sales reading eased concerns that economic growth might be slowing.

Google rose 2.4% to $1,149.40, giving a large boost to the outperforming Nasdaq, a day after the company announced plans to acquire Nest Labs Inc. The $3.2 billion deal will give Google a promising line of products and a prized design team.

Core US retail sales increased 0.7% in December from the prior month, flying past the 0.3% gain economists had expected. Fourth-quarter economic growth prospects were further boosted by a report showing retail inventories, excluding autos, increased 0.6% in November.

 

The data followed Friday's payroll report, which showed job growth for December that was sharply below expectations.

"Retail sales numbers for December sort of calmed everyone down," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "Numbers indicate the economy is most likely moving forward at a nice pace despite an errant jobs number last Friday."

The Dow Jones industrial average rose 115.92 points or 0.71%, to 16,373.86, the S&P 500 gained 19.68 points or 1.08%, to 1,838.88, and the Nasdaq Composite added 69.712 points, or 1.69%, to 4,183.016.

Tuesday's gains came a day after the S&P 500 posted its largest drop in two months, and market participants say they are gearing up for a more volatile 2014 after a year that saw US stocks constantly go higher.

"We're seeing a good preview of what the year will bring, which is a little bit more volatility," said Andres Garcia-Amaya, Global Market Strategist at J.P. Morgan Funds.

The CBOE volatility index dropped 7.5% to 12.28 after gaining 9.4% on Monday.

"We got accustomed to very low volatility and (a VIX reading of) 14-16 is not out of the question," Garcia-Amaya said.

Shares of General Motors jumped 3% to $41.20 in extended trading after the company said it will pay the first quarterly dividend on its common stock in almost six years.

Intel Corp shares jumped 4% to close at $26.51 in regular trade after JPMorgan upgraded the stock to "overweight" from "neutral."

Electric car maker Tesla said deliveries of its Model S sedan in the fourth quarter blew past its forecast, sending shares up 15.7% to $161.27.

Both JPMorgan Chase & Co and Wells Fargo & Co posted earnings that beat expectations, though upside was limited with Wells Fargo shares already near all-time highs and JPMorgan shares at their highest since 2000. Shares of both banks rose less than 0.1% on the day.

With just 5% of the S&P 500 companies having reported quarterly results, 53.8% have beaten earnings expectations, according to Thomson Reuters data, below the 63% historical average. About 62% have beaten on revenue, above the long-term 55% average.

Bank of America Corp , Citigroup , Goldman Sachs and Morgan Stanley will post results later in the week. General Electric Co and Intel are also on tap.

Both GameStop Corp and Stratasys Ltd slumped after giving outlooks that were weaker than expected. GameStop lost 19.9% to $36.31, while 3D printer maker Stratasys slid 8.2% to $119.37.

In contrast, Intuitive Surgical advanced 6.8% to $419.88 after the surgical equipment maker gave a strong fourth-quarter outlook.

Charter Communications is trying to strike a deal to buy Time Warner Cable and sway its shareholders after three of its offers have been rebuffed. On Monday, Charter took its approach public and proposed paying $132.50 per TWC share.

TWC shares gained 2.7% to $136 and Charter added 2.3% to $137.34.

Volume was roughly in line with the year-to-date average of about 6.5 billion shares traded on US exchanges, according to data from BATS Global Markets. Monday's sharp decline came in volume of 7.22 billion shares.

Advancing stocks outnumbered decliners on the NYSE by 12 to 5 and on the Nasdaq three issues rose for every one that fell.