Most U.S. Stocks Decline on Fed's Reduced Forecast for Growth

Most U.S. stocks fell, halting a six-day rally, as a drop in retail sales and the Federal Reserve’s assessment that the economic outlook has “softened” overshadowed Intel Corp.’s forecast for record profit.

Home Depot Inc., American Express Co. and Alcoa Inc. declined the most in the Dow Jones Industrial Average as minutes from the Fed’s last meeting showed policy makers saw no need to boost economic stimulus even as they trimmed growth forecasts. Intel, the largest chipmaker, rose 1.7 percent after reporting record second-quarter sales. Stocks pared losses in the final minutes of trading.

About four stocks declined for every three that advanced on U.S. exchanges. The S&P 500, which had rallied 7 percent over the previous six sessions, slipped less than 0.1 percent to 1,095.17 as of 4 p.m. in New York. The Dow rose 3.7 points, or less than 0.1 percent, to 10,366.72. Aided by Intel, the Nasdaq Composite Index rose 0.4 percent to 2,249.84.

“It corroborates what we’ve been seeing in the economic data points over the past month,” John Massey, a money manager at SunAmerica Asset Management Corp. in Jersey City, New Jersey, said of the Fed minutes. “The market’s gone up six days in a row and is looking for an excuse to give up some of the gains.” SunAmerica manages $38 billion.

The S&P 500 has rebounded 7.1 percent from a 10-month low on July 2, paring its drop for the year to 1.8 percent, amid optimism that second-quarter earnings will overshadow disappointing home sales, manufacturing and jobs data. Analysts predict earnings in the S&P 500 grew 34 percent last quarter, according to estimates compiled by Bloomberg.

S&P 500 Performance

The S&P 500 plunged 16 percent between April 23 and July 2, reaching its lowest valuation relative to earnings in a year, on concern a sovereign-debt crisis in Europe is spreading and economic growth in China and the U.S. is slowing. The benchmark gauge closed up 1.5 percent yesterday, a sixth day of gains and the longest winning streak since April 15. It hasn’t advanced for seven straight days since October 2006.

Slowing inflation, constrained household spending and contracting credit prompted Fed policy makers last month to restate a pledge to keep the benchmark lending rate at around zero for “an extended period,” the Fed’s statement showed.

“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released today in Washington said. “The changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.”

AmEx, Home Depot

Home Depot, the largest U.S. home-improvement retailer, declined 1.3 percent to $28.28. American Express, the biggest U.S. credit-card issuer by purchases, fell 1.1 percent to $43.70. Aluminum producer Alcoa Inc. dropped 0.8 percent to $10.91. JPMorgan Chase & Co. is scheduled to report second- quarter results tomorrow before the market opens.

Financial stocks were the biggest drag on the S&P 500 of 10 industry groups, led by banks. Zions Bancorporation, Regions Financial Corp. and SunTrust Banks Inc. fell more than 2.7 percent. Whitney Holding Corp. said provisions for second- quarter credit losses will be as high as $62 million because of weakness in the Florida real estate market. Whitney Holding slid 18 percent to $8.18.

Retail Sales

Futures dropped after the retail sales report. Purchases decreased 0.5 percent, more than expected, following a 1.1 percent May drop, the Commerce Department said. Excluding auto dealers, demand fell 0.1 percent, matching the median forecast of economists surveyed by Bloomberg News.

Walt Disney Co., the world’s largest media company, declined 0.6 percent to $34.24. Target, the second-biggest U.S. discount retailer, fell 0.5 percent to $49.65. Intel gained 1.7 percent to $21.36. The company, whose processors run more than 80 percent of the world’s personal computers, reported record second-quarter sales and topped analysts’ estimates with its forecast for the current period, allaying concern that a rebound in technology spending is losing steam.

“Intel has reach over both consumer and investment spending, and also has reach throughout the world,” said William Greiner, president and chief investment officer of Scout Investment Advisors in Kansas City, which manages $7.5 billion. Its results show that “businesses in general are making the leap toward investment spending.”

Nvidia Rises

Nvidia, the second-largest maker of graphics chips, rose 1 percent to $11.03.

Expeditors International of Washington Inc. rose 6.7 percent to $39.64 for the biggest gain in the S&P 500. The manager of cargo ships said second-quarter profit was at least 38 cents a share, topping the 31-cent average analyst estimate.

Lincoln National Corp. fell the most in the S&P 500, dropping 5.7 percent to $24.04. The insurer that paid back a $950 million U.S. rescue was downgraded at Credit Suisse Group AG on the risk of impairment charges.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

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