S&P 500 Falls After 7-Day Rally Drove Index Toward Record

Most U.S. stocks fell as the Standard & Poor’s 500 Index snapped a seven-day rally that drove the benchmark gauge to within nine points of its record high.

Apple Inc. slumped 2.2 percent as IDC predicted the company will lose market share in the tablet market. Citigroup Inc. dropped 1.4 percent as financial shares retreated amid speculation bank debt will face scrutiny by the Basel Committee on Banking Supervision. Costco (COST) Wholesale Corp., the largest U.S. warehouse-club chain, gained 1.3 percent after second-quarter profit rose 39 percent.

The S&P 500 fell 0.2 percent to 1,552.48 at 4 p.m. in New York, after reaching the highest level since October 2007 yesterday. The Dow Jones Industrial Average managed to end higher for an eighth straight day, its longest winning streak in two years. It added 2.77 points, or less than 0.1 percent, to a record 14,450.06. Three stocks fell for every two that climbed on U.S. exchanges, as 5.8 billion shares traded hands, 8 percent below the three-month average.

“After setting new all-time highs for several consecutive days, the market may be a little tired, and rightly so,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion. “With little in the way of catalysts, it would not be surprising to see the streak end. That being said, as long as central bank accommodation remains, any pullback should be short-term in nature.”

More than $10 trillion has been restored to U.S. equity values during the four-year bull market as the S&P 500 more than doubled from the bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Federal Reserve. The Dow recouped all its losses from the financial crisis in less than 65 months, more than a year faster than the recovery from the Internet bubble.

Equity Funds

U.S. equity funds attracted $4.9 billion in the first week of March, the most in more than a month, according to data from EPFR Global.

The S&P 500 is valued at 15.3 times earnings, a 22-month high. That’s still 7.3 percent below an average of 16.6 over the last decade. The Dow is trading at a price-to-earnings ratio of 14.1, the highest level in almost two years and 11 percent below its 10-year average of 15.8. About 85 percent of stocks in the S&P 500 yesterday closed above their average price from the past 50 days, according to data compiled by Bloomberg.

VIX Rebounds

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 6.1 percent to 12.27. The gauge, known as the VIX, dropped 8.2 percent yesterday to its lowest level since February 2007.

“There’s really not of lot of meat and potatoes today,” Stephen J. Carl, head equity trader at New York-based Williams Capital Group, said over the phone. “We’ve had two days of really not a lot of economic data. We’re also just keeping our eyes on oversees and the financial community there.”

Banks, technology shares and industrial companies retreated the most out of 10 groups in the benchmark index, dropping at least 0.5 percent. An S&P gauge of homebuilders sank 1.9 percent as all 11 members declined.

Red Hat Inc. tumbled 4.8 percent to $50.60, while Google Inc. fell 0.9 percent to $827.61.

Apple slumped 2.2 percent to $428.43. Google’s software will power more tablets than Apple Inc.’s operating system for the first time this year as smaller, cheaper alternatives to the iPad gain favor with consumers, according to IDC.

Jefferies analyst Peter Misek cut his price target on Apple to $420 from $500, citing delayed iPhone 5S and low-cost iPhone introductions due to problems with new casing colors.

Debt Addiction

Financial shares dropped, with the KBW Bank Index slipping 0.7 percent from the highest level since April 2010. Citigroup fell 1.4 percent to $46.95, retreating from a two-year high.

A planned international limit on bank indebtedness will be on the agenda of every meeting of the Basel group this year as regulators seek to wean lenders off their addiction to debt, according to three people familiar with the talks. Regulators are preparing to fight lenders over the details of the so-called leverage ratio as they seek to toughen rules on the minimum amount of capital they must use to back their investment. The Basel group will meet tomorrow.

Salesforce.com Inc. lost 2.8 percent to $180.79. The largest maker of online customer-management software plans to offer $1 billion in convertible senior notes in a private placement to institutional investors. A portion of proceeds from the notes will be used for acquisitions, investments in technology and capital expenditures, the San Francisco-based company said today in a statement.

Caterpillar Falls

Caterpillar Inc., the biggest maker of construction and mining equipment, fell 1.6 percent, the most in the Dow, to $89.74. Tigress Financial Partners LLC initiated research coverage of the company with an underperform rating.

CVS Caremark Corp. slid 1.1 percent to $52.08. Goldman Sachs cut its rating on the drugstore chain to neutral from buy.

U.S. Silica Holdings Inc. dropped 7.8 percent to $24.47. The silica producer said GGC USS Holdings, an affiliate of Golden Gate Capital, will sell 8.5 million shares of the company’s common stock in an underwritten offering.

J.C. Penney Co. rose 4 percent to $15.65. The department-store chain that last month posted the lowest annual sales in more than two decades said speculation that Chief Executive Officer Ron Johnson plans to leave the company is wrong.

Jet Order

Boeing Co. climbed 1.5 percent to $84.16. The Chicago-based company won a jet order from Ryanair Holdings Plc valued at $15.1 billion at list price, selling 170 of its 737-model planes as that aircraft is phased out in favor of the Max version, people familiar with the matter said.

Costco advanced 1.3 percent to $103.75. The company said second-quarter net income rose to $547 million, or $1.24 a share. Analysts in a Bloomberg survey had projected profit of $1.06.

Yum! Brands Inc. (YUM) climbed 1.3 percent to $68.73. The owner of the KFC restaurant chain said first-quarter same-store sales fell 20 percent in China, less than the 25 percent drop analysts had estimated. Yum, which has more than 5,200 restaurants in China, is trying to revive sales in the country after a probe of a former chicken supplier.

VeriFone Systems

VeriFone Systems Inc. jumped 6 percent to $21.68. Douglas Bergeron was dismissed as chief executive officer after missing analysts’ estimates for second-quarter profit amid diminished demand for credit-card terminals. The shares were raised to positive from neutral by Susquehanna International Group equity analyst Meghna Ladha.

Merck & Co. rallied 3.2 percent to $45.04, the most since July. The company said it is continuing a study of its cholesterol lowering drug Vytorin after an interim review of the data by an outside committee. The announcement “suggests no safety issues,” said Mark Schoenebaum, an analyst with ISI Group in New York, in a note to clients.

Wal-Mart Stores Inc., the world’s largest retailer, added 0.9 percent to $73.60. Chief Financial Officer Charles Holley said that a slowdown in sales at the end of January wasn’t “disastrous.” Sales returned to normal by the end of February after being hurt by delayed tax returns the previous month, Holley said today at the Bank of America Merrill Lynch 2013 Consumer & Retail Conference in New York.

Jefferies Group LLC raised its year-end estimate for the S&P 500 by 6.9 percent on earnings that beat estimates and speculation investors will shift money to stocks from bonds. Sean Darby, the firm’s Hong Kong-based chief global equity strategist, boosted his 2013 forecast to 1,673 from a previous estimate of 1,565.

“While we acknowledge that the economy is ‘work in progress’ and equity valuations are trading slightly above fair value, the improvement in the earnings picture coupled with subdued bond yields ought to allow equity prices more room to inflate,” Darby wrote in a note to clients today.

To contact the reporters on this story: Sarah Pringle in New York at springle1@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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