U.S. stocks rebounded from a two-day selloff as optimism over corporate earnings and jobs growth overshadowed central bank concern that investors may be growing complacent about the economic outlook.
American Airlines Group Inc. rallied 4.3 percent after raising its margin forecast. Facebook Inc. advanced 3.5 percent to pace gains among a gauge of technology shares. Bob Evans Farms Inc. slid 4.4 percent as quarterly revenue missed estimates.
The Standard & Poor’s 500 Index rose 0.5 percent to 1,972.83. The Dow Jones industrial average added 78.99 points, or 0.5 percent, to 16,985.61. About 5.4 billion shares changed hands on U.S. exchanges, 8.3 percent below the three-month average.
“The market can go down, but it won’t stay down,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “The fact that the market is still questioning all these things that are going on is a very healthy sign. I still think the Fed is going to be more concerned about making absolutely sure that the U.S. economic recovery is underway and staying underway.”
Equities initially turned lower after Federal Reserve meeting minutes showed some policy makers were concerned investors may be growing too complacent about the economic outlook and the central bank should be on the lookout for excessive risk-taking. Officials are also debating the timing for the first increase in the main interest rate since 2006.
The S&P 500 has not had a drop of 10 percent in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2011, when it was in the middle of a 19 percent slide, its biggest during the current five-year bull market.
Equity losses in the previous two days were concentrated in technology shares and small-caps with high valuations. Twitter Inc. and Pandora Media Inc., which trade at more than 150 times estimated earnings, plunged about more than 9 percent. Facebook Inc. and TripAdvisor Inc. sank at least 5.3 percent.
Facebook rose 3.5 percent to $64.97. The stock paced gains in the Nasdaq 100 Index of large technology shares, which had fallen for two straight days.
More than 130 companies in the S&P 500 are scheduled to report quarterly results in the next two weeks, including Citigroup Inc., JP-Morgan Chase & Co., Goldman Sachs and Johnson & Johnson.
Profit at S&P 500 companies probably rose 5 percent in the three months through June, while sales gained 3 percent, estimates compiled by Bloomberg show. The forecasts are lower than they were at the start of April, when analysts predicted a 7.3 percent rise in earnings and 3.7 percent sales increase.
American Airlines gained 4.3 percent to $41.99. The carrier said second-quarter pretax margins would exceed the company’s previous forecast. The company also said it sees strong global travel demand and no “material pockets of weakness.”
Reynolds American Inc. rose 2.2 percent to $62.67. The U.K.’s Daily Mail speculated British American Tobacco Plc may purchase the rest of the cigarette producer. BAT holds about 42 percent of Reynolds, according to data compiled by Bloomberg.
Bob Evans Farms slid 4.4 percent to $47.57.