US stocks rebound after manufacturing data

Salesforce ’s shares climbed after its fourth-quarter earnings, announced after the market close on Thursday, were above Wall Street’s expectations.

Revenues at the business-software company jumped 32 per cent to $834.7m, although it registered a net loss due to $108m in stock-based compensation and a one-time tax charge. The stock gained 6.7 per cent to $182 over the past week, most of it from Friday’s 7.5 per cent jump, its biggest one-day gain in three months.

Analysts at Goldman Sachs raised their price target for the stock, citing the company’s growth potential in software space.

“We continue to view Salesforce as one of the premier growth stories in software as it continues to expand its footprint and define new product categories,” they wrote.

Groupon shares jumped 12.6 per cent to $5.10, recovering some of the steep losses from the previous session after it announced disappointing quarterly results. The stock rallied after Andrew Mason, ìts chief executive, was dismissed on Thursday, although it was down 10.8 per cent over the week.

Overall, US equity markets started March on a positive note even though the main indices dipped in and out of negative territory.

Stocks were hit in early activity as investors reacted to disappointing data from China and Europe and sequestration in the US – $85bn in spending cuts due to take full effect at midnight on Friday. However, markets recovered after a surprise rise in US manufacturing activity in February.

China’s manufacturing growth slowed, while inflation in the eurozone fell below 2 per cent and unemployment hit a fresh high, putting pressure on the ECB to lower rates further.

Markets swung back and forth as political leaders met at the White House in a last-ditch effort to avert the sequestration.

The benchmark S&P 500 closed up 0.2 per cent at 1,518.21 after dipping into negative territory twice during the day and finished the week 0.2 per cent higher. The index has gained more than 6 per cent year to date.

In a research note to clients, Bank of America Merrill Lynch said Wall Street equity sentiment took a step back in February. The bank’s measure of bullishness on stocks fell last month, the first decline in seven months, while “Wall Street’s bearishness on equities remains at extreme levels relative to history”.

“Given the contrarian nature of this indicator, we remain encouraged by Wall Street’s ongoing lack of optimism . . . The indicator remains firmly in ‘buy’ territory,” the note said.

The Nasdaq Composite index was 0.3 per cent higher at 3,169.74, while its biggest component, Apple , lost 2.5 per cent to $430.51, its lowest level in more than a year. The stock has lost 4.5 per cent since the start of the week.

Best Buy shares rallied after the fourth-quarter results were above estimates, even though revenue growth was modest. The electronics retailer also ended takeover talks with the company’s founder Richard Schulze after it rejected a minority investment proposal valued at $1bn.

Shares gained 4.6 per cent to $17.16 in a volatile trading session, at one point dipping into negative territory, and recorded a 0.8 per cent gain on the week.

Yahoo shares attracted buyers, rising 3 per cent to $21.94 and helping the stock to a weekly gain of 3.4 per cent.

The Dow Jones Industrial Average, which tracks 30 blue-chip stocks, rose 0.2 per cent to 14,089.66.

Among energy companies, Peabody Energy and Consol Energy were the worst performers. Peabody shares were down 4.7 per cent to $20.54 and lost 9.4 per cent over the week. Consol Energy dropped 4.8 per cent to $30.64 and shed 5.7 per cent over the past five days.

Chesapeake Energy shares lost 2.5 per cent to $19.67 after news reports that the company and Aubrey McClendon, its outgoing chief executive, were under investigation by the Securities and Exchange Commission over his controversial pay package.