S&P 500 falls as Fed valuation concerns overshadow banks

Stock prices were mixed Tuesday as investors pondered the comments of the Federal Reserve Board chairwoman before the Senate Banking Committee.

The Dow Jones industrial average was up 5.26 points to 17,060.68. The Nasdaq composite index fell 24.03 points to 4,416.39, and the Standard & Poor’s 500 index dropped 3.82 points to 1,973.28.

The Nasdaq decline followed comments by Janet Yellen to senators suggesting some social media and biotech stock prices may be at extreme values.

She also said the improving labor market could lead the Fed to raise short-term rates, but that other factors would prevent such a move in the near future.

Gold continues to fall, dropping $9.60 to $1,297.10 an ounce. And oil fell to the lowest level since May 6, down 95 cents to $99.96 a barrel.

Lorillard Inc. (NYSE: LO) dropped 10 percent to $60.17 after Reynolds American Inc. (NYSE: RAI) reached an agreement to buy its rival for about $25 billion. Reynolds American slumped 6.9 percent to $58.84.

JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GM) rose after the banks reported better-than-forecast earnings.

Intel Corp. (Nasdaq: INTC) jumped 4.5 percent after the market closed as it reported results.

More than 6 billion shares changed hands on U.S. exchanges Tuesday, 4.8 percent above the three-month average.

Small-caps and Internet shares were the biggest victims of a market retreat earlier this year as investors dumped the best performers of the bull market amid concern valuations advanced too far.

Fed officials have made cautionary statements about valuations for smaller companies already this year.

Minutes from the Fed’s June meeting, released last week, showed some policymakers 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.

The central bank must press on with monetary stimulus as “significant slack” remains in labor markets and inflation is still below the Fed’s goal, Yellen said in semiannual testimony prepared for delivery to the Senate Banking Committee.

Pandora Media Inc. (NYSE: P), which trades at more than 160 times projected earnings, fell 1.2 percent. Facebook Inc. (Nasdaq: FB) and TripAdvisor Inc. (Nasdaq: TRIP), which rallied more than 98 percent in 2013, lost at least 1 percent.

JPMorgan rose 3.5 percent to $58.27. The biggest U.S. bank by assets posted second-quarter profit that beat estimates as fixed-income trading revenue fell less than analysts expected.

Goldman Sachs, which set a Wall Street record for trading revenue in 2009, added 1.3 percent to $169.17. The bank reported a surprise increase in second-quarter profit as fixed-income revenue fell less than many analysts projected and investment-banking fees rose.

Banks have seen profits hurt in recent quarters as the Fed slows its bond buying and fixed-income clients make fewer bets amid low volatility.

Wells Fargo & Co. (NYSE: WFC), the most valuable U.S. bank, posted second-quarter profit last week that rose 3.8 percent on lower credit costs, while Citigroup (NYSE: C) said Monday that net income fell 96 percent as the company agreed to pay $7 billion to resolve a mortgage-related probe.

Intel climbed 4.5 percent as of 4:57 p.m. in New York. After the close or regular trading, the world’s biggest maker of semiconductors forecast third-quarter sales that topped some analysts’ predictions, fueling optimism for a stronger rebound in the personal-computer market.

Plug Power Inc. (Nasdaq: PLUG) jumped 16 percent to $4.85 during regular trading. FBR Capital Markets began coverage on the developer of fuel-cell systems with an “outperform” rating, similar to a “buy” recommendation, with a price estimate of $8 on the shares.

GoPro Inc. (Nasdaq: GPRO) climbed 13 percent to $41.63. JMP Securities LLP started coverage of the company, whose cameras let surfers, skiers and sky divers record their exploits, with a rating of “market perform,” similar to a “buy” recommendation.

— Bloomberg contributed to this report.

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