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S&P 500 Trims Loss on Speculation Selloff Was Overdone

The Standard & Poor’s 500 Index (SPX) trimmed losses in the final two hours of trading ahead of data forecast to show growth in consumer confidence and spending tomorrow, the final day of the best first quarter since 1998.

The S&P 500 retreated 0.2 percent to 1,403.28 at 4 p.m. New York time, paring a loss of as much as 1 percent. The Dow Jones Industrial Average (INDU) rose 19.61 points, or 0.2 percent, to 13,145.82 after reversing a drop of as much as 94 points to halt a two-day decline.

“It’s buying on weakness,” Tim Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York, said in a phone interview. “The corrections seem to be very short lived because money just seems to be flowing right in. The end of the quarter is imminent. Given that it’s been a positive quarter for stocks, many managers don’t want to show any cash in their client portfolios.”

The S&P 500 has risen 12 percent since the beginning of 2012 amid better-than-estimated economic data and expectations Europe would tame its crisis. The index has gained 2.8 percent in March, rallying for a fourth straight month and poised for the longest streak of monthly gains since September 2009.

Alcoa Inc. (AA), Caterpillar Inc. (CAT) and Coca-Cola Co. climbed more than 1.5 percent for the biggest gains in the Dow today. Red Hat Inc. (RHT) surged 20 percent after profit and sales topped projections. Bank of America Corp. and Citigroup Inc. fell more than 1.4 percent to pace losses in financial companies. Best Buy (BBY) Co., the largest consumer-electronics retailer, slumped 7 percent on plans to close 50 stores as sales missed forecasts.

‘Down the Road’

Benchmark equity indexes slumped earlier as S&P said Greece may have to restructure its debt again. There may be “down the road, I’m not predicting today when, another restructuring of the outstanding debt,” said Moritz Kraemer, head of sovereign ratings at S&P. In the U.S., claims for unemployment benefits fell to the lowest since April 2008. The economy grew at a 3 percent annual rate from October through December, separate data showed.

“People are taking some chips off the table,” said Matt McCormick, who helps oversee $5.8 billion at Bahl & Gaynor Inc. in Cincinnati. “It’s been a good run and people are questioning: is that sustainable? The measures taken by European authorities have put those issues in the back burner. If that narrative changes, it makes people address something that they thought was already taken care of.”

Gauges of utility and health-care companies in the S&P 500 gained, while financial shares slumped. Alcoa added 2 percent to $10.03. Caterpillar rose 1.7 percent to $106.02. Coca-Cola advanced 1.6 percent to $73.81.

Corporate Demand

Red Hat surged 20 percent, the most in the S&P 500, to a 12-year high of $61.43. The company was surprised by demand for its Red Hat Enterprise Linux software from corporations preparing to move more applications to the so-called cloud, where they can be delivered to users over the Internet, Chief Executive Officer Jim Whitehurst said in an interview. Profit for the current fiscal year will be as much as $1.20 a share, the company projected, exceeding estimates.

Health maintenance organizations rose. Investors speculated the Supreme Court will overturn aspects of the Affordable Care Act, benefiting managed care companies, according to Dave Shove, an analyst at BMO Capital Markets. Aetna Inc. (AET) added 6.5 percent to $49.56. UnitedHealth Group Inc. (UNH) rallied 4.8 percent to $58.11.

Illumina Inc. (ILMN) climbed 5.1 percent to $52.40. Roche Holding AG raised its hostile takeover offer for Illumina by 15 percent to about $6.7 billion, yielding to demands for a higher price from shareholders of the U.S. maker of gene-mapping tools.

Collective Brands

Collective Brands Inc. (PSS) jumped 8.4 percent to $19.99. South Korean clothing company E-Land Group said it will bid for the retailer, which owns the Payless ShoeSource chain.

Global dealmaking slumped for a third straight quarter as chief executive officers funneled cash into share buybacks and new products, a trend that may reverse in the coming months as the economic recovery gains momentum. Mergers and acquisitions so far this quarter fell 14 percent from the fourth quarter to $418 billion, making it the slowest three-month period in 2 1/2 years, according to data compiled by Bloomberg.

“I still think big cash surpluses will lead to more M&A because companies fundamentally want to grow,” said Peter Tague, who started as co-head of global M&A at Citigroup (C) in New York this month.

The KBW Bank Index (BKX) slumped 1.1 percent as 23 of its 24 stocks declined. A measure of European lenders dropped 2.9 percent. Bank of America lost 2.3 percent to $9.53. Citigroup slid 1.5 percent to $36.51.

Best Buy

Best Buy tumbled 7 percent to $24.77. Chief Executive Officer Brian Dunn trimmed discounts after the holiday shopping season, sacrificing sales to maintain profitability. The retailer is closing big-box stores and cutting jobs to reduce costs while boosting online sales and opening smaller locations.

Mosaic Co. (MOS) slid 5.1 percent to $55.27. The largest U.S. potash producer said earnings fell to 64 cents a share in the quarter ended Feb. 29 from $1.21 a year earlier. That missed the 69-cent average estimate of 19 analysts compiled by Bloomberg.

Big Lots Inc. (BIG) sank 4.8 percent to $43.42. The discount retailer’s sales trends are “not as good as we’d hoped,” Charles Grom, an analyst with Deutsche Bank AG, wrote in a note after meeting with the company’s management.

The S&P 500 will likely remain stuck in the 500-point range where it’s been four-fifths of the time since 2000 until the Federal Reserve allows interest rates to rise, according to Piper Jaffray Cos.

Trading Range

The benchmark measure fell in the previous two days after reaching 1,416.51, the highest level since May 2008 and 9.5 percent below its record high of 1,565.15 from 2007. The index has traded between 1,000 and 1,500 for about 80 percent of the time since 2000, according to data compiled by Bloomberg.

Equity gains stalled in the past 12 years as the economy suffered from the bursting of bubbles in technology and real estate, forcing the central bank to cut its benchmark interest rate to near zero from 6.5 percent to spur growth. Fed Chairman Ben S. Bernanke has pledged to keep borrowing costs low through at least late 2014.

“The S&P 500 is approaching the upper end of the secular trading range,” Craig W. Johnson, a Minneapolis-based technical market strategist with Piper Jaffray, wrote in a note yesterday. “This resistance will likely remain intact until 2014-2015, and will correspond with a secular change in bond yields.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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