Defensive sectors support US market

STOCKS that outperform in a weak economy helped buoy the Dow and S&P 500 yesterday as concerns about faltering growth and inflation prompted investors to seek out less volatile names.

Energy shares also rallied as US crude gained more than one per cent.

The S&P 500 fell almost one per cent early but found support near 1,300, a level that attracted buying interest in early March.

Stocks have lately sagged as economists have lowered forecasts for US growth. A poll of economists showed 2011 gross domestic product forecasts fell to 2.9 per cent from 3.1 per cent.

“GDP forecasts are continuing to fall, so [bets on defensives] are a safety trade,” said Peter Boockvar, equity strategist at Miller Tabak & Co.

Adding to the bearish sentiment, Google shares fell five per cent after the bell after the Internet giant posted quarterly results.

The Dow industrials’ top percentage gainers during the regular session were Coca-Cola, up 1.5 per cent, Kraft Foods, up 1.7 per cent and Merck & Co, up 1.2 per cent.

A Senate investigation of Goldman Sachs hurt the Wall Street giant and some of its peers, while an unexpected rise in jobless claims added to bearish sentiment that kept gains in check.

Goldman shares fell 2.7 per cent and were a drag on the S&P financial sector, which was down 0.9 per cent.

The Dow Jones industrial average rose 14.16 points, or 0.12 per cent, to 12,285.15. The Standard & Poor’s 500 gained 0.11 of a point, or 0.01 per cent, to 1,314.52. The Nasdaq Composite dropped 1.30 points, or 0.05 per cent, to 2,760.22.

Adding to the energy sector boost as oil rose, natural gas producer and pipeline company El Paso said it will develop a shale oil field without a partner. El Paso shares jumped 5.5 per cent to lead gains in the S&P energy sector’s index, which rose 0.6 per cent.

Weighing on the tech sector, Fairchild Semiconductor shares dropped 4.5 per cent as it disappointed investors after it said last month’s earthquake that threw Japan’s electronics supply chain into disarray has yet to generate new business for the company.

Supervalu forecast fiscal-year earnings above Wall Street’s expectations after its quarterly profit fell less than feared. The supermarket operator’s shares shot up 16.9 per cent.

Shares of Arcos Dorados, a large South American franchisee of fast-food chain McDonald’s, yesterday jumped by 24.7 per cent in their stock market debut.