Dow Average Snaps Rally as Consumer Confidence Declines
JPMorgan Chase & Co. lost 1.9 percent after a Senate panel said it hid losses and dodged regulators. Financial stocks reversed earlier losses in the wake of Federal Reserve stress tests, as Bank of America Corp. and Morgan Stanley added at least 3.5 percent. Carnival Corp. fell 2.2 percent after trimming its earnings forecast. DirectTV rose 4.5 percent after pulling out of a bidding war for Vivendi SA’s GVT division.
The Standard & Poor’s 500 Index (SPX) fell 0.2 percent to 1,560.70 at 4 p.m. in New York, trimming its weekly gain to 0.6 percent. The Dow Jones Industrial Average slid 25.03 points, or 0.2 percent, to 14,514.11. The 30-stock gauge rose 0.8 percent this week. About 8.5 billion shares traded hands on U.S. exchanges today, 34 percent above the three-month average, ahead of the expiration of futures and options contracts in a process known as quadruple witching. Today also marked the biggest day for volume so far this year, Bloomberg data show.
“This is a market that is digesting, it’s a market that is in watchful wait mode, and waiting either to continue this pullback or getting ready for the next leg,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion of assets, said in a phone interview. “It’s healthy to have these gaps between run-ups.”
The S&P 500 (SPX) climbed yesterday to within two points of its record closing level of 1,565.15 set in October 2007. The gauge has more than doubled from its bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Federal Reserve. The Dow set an all-time high for the eighth day in a row yesterday.
Equities declined today as the Thomson Reuters/University of Michigan preliminary sentiment index for March fell to 71.8 from 77.6 in February. The gauge was projected to increase to 78, according to the median estimate of 67 economists surveyed by Bloomberg.
Industrial production rose 0.7 percent in February, exceeding the median projection in a Bloomberg survey, figures from the Federal Reserve showed today in Washington. Separate data showed manufacturing in the New York region expanded for a second month in March and industry managers grew more optimistic about the future.
A Bloomberg gauge of U.S. airlines slid 1.2 percent, as all 10 of its members retreated. Delta Air Lines Inc. dropped 1.7 percent to $16 and U.S. Airways Group Inc. fell 1.7 percent to $15.98. The airlines’ ratings were cut to market perform from outperform by Savanthi Syth, an equity analyst at Raymond James.
Banks advanced the most out of 24 S&P groups, erasing earlier losses. Wells Fargo & Co. rose 3.3 percent to $38.20, its highest level since September 2008, and Fifth Third Bancorp added 1.5 percent to $16.61.
Bank of America gained 3.8 percent to $12.57, for the largest increase in the Dow. The second-largest U.S. lender won the Fed’s approval to buy back as much as $5 billion in stock, the firm’s first repurchase since the financial crisis. The bank said it can also redeem $5.5 billion in preferred shares.
Morgan Stanley added 3.5 percent to $23.59. The owner of the world’s biggest brokerage got permission to buy the remaining 35 percent of its wealth-management venture with Citigroup Inc. after passing the Fed’s annual stress tests.
Discover Financial Services rose 3 percent to $44.14, an all-time high. The credit-card issuer approved a $2.4 billion stock buyback and boosted its quarterly dividend to 20 cents from 14 cents.
JPMorgan fell 1.9 percent, the most in the Dow, to $50.02. Goldman Sachs Group Inc. rose 0.5 percent to $154.84, reversing an earlier loss. The world’s biggest trading firms must submit new capital plans to regulators to address weaknesses the Fed found in their planning processes.
Separately, a Senate investigation found that JPMorgan Chief Executive Officer Jamie Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet last year.
Phone companies and consumer-staples shares retreated the most in the S&P 500 among 10 groups, losing at least 0.5 percent. Verizon Communications Inc. fell 1 percent to $48.02 and AT&T Inc. slid 1.2 percent to $36.43.
Carnival slumped 2.2 percent to $34.95. The cruise operator beset by mishaps at sea this year cut its annual earnings forecast, reflecting costs from an engine fire that crippled the Carnival Triumph last month.
Boeing Co. (BA) gained 2.1 percent to $86.43, its highest level in almost five years. The company said safety upgrades to the 787 Dreamliner’s battery systems may allow commercial flights to restart within weeks, ending a two-month grounding of the composite-plastic fleet.
Freeport-McMoRan Copper & Gold Inc. climbed 1.9 percent to $33.80. Goldman Sachs raised its rating on the the world’s second-largest copper miner to buy from neutral.
DirectTV surged 4.5 percent to a record $54.99. The largest U.S. satellite-TV provider pulled out of bidding for Vivendi’s Brazilian phone and Internet unit, GVT, forgoing an option to add more services in South America.
U.S. economic growth will have to accelerate to “ridiculously strong levels” to justify any advance for the S&P 500 above 1,600, said Jim O’Neill, chairman of Goldman Sachs Asset Management.
O’Neill, who coined the term BRIC in describing the rise of Brazil, Russia, India and China, has an estimate of 1,575 for the U.S. equity benchmark this year. The world’s biggest economy is forecast to grow 1.9 percent in 2013 and 2.7 percent next year.
“In order to justify the S&P above 1,600, we’d have to see growth expectations go to something like 4 percent and beyond,” O’Neill said in a Bloomberg Television interview in Singapore. “I don’t see persistent upside from those kind of levels without some more evidence that the economy would be growing by ridiculously strong levels.”
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