Schlumberger Ltd. and Noble Corp. declined more than 3.2 percent as crude oil slipped. An index of airlines reached an almost seven-year high amid optimism fuel costs may drop. Alcoa Inc. (AA) climbed 3.8 percent and Caterpillar Inc. rose 1.8 percent after analysts recommended buying the shares.
The S&P 500 dropped 0.1 percent to 1,802.48 at 4 p.m. in New York, erasing earlier gains of as much as 0.2 percent. The Dow Jones Industrial Average added 7.77 points, or 0.1 percent, to an all-time high of 16,072.54. The Nasdaq Composite Index rose 0.1 percent to 3,994.57, after briefly surpassing 4,000 for the first time since September 2000. About 5.6 billion shares changed hands on U.S. exchanges, about 7.8 percent below the three-month average.
“The market is not necessarily over-extended, but probably moderately rich,” Cam Albright, director of asset allocation at the investment advisory unit of Wilmington Trust, said by phone from Wilmington. The firm oversees about $79 billion. “It’s probably difficult to envision this market getting a lot more upside unless it has this continued success on earnings and economic growth. The deal with Iran takes some of the risk premium out of the marketplace for the moment at least.”
Iran agreed yesterday to curtail nuclear activities in return for easing of some sanctions on oil, auto parts, gold and precious metals, an accord that broke a decade-long deadlock.
The S&P 500 has rallied 26 percent this year, closing for the first time above 1,800 on Nov. 22, as the Federal Reserve continued to buy $85 billion of bonds a month to stimulate economic growth. The gauge is challenging 2003 for the best annual gain since 1998.
The index is trading for about 17 times its companies’ reported earnings. While the valuation reached the highest level since May 2010, it’s still below the multiples at the market’s two previous peaks, when the ratio reached 17.5 in October 2007 and 31 in March 2000, data compiled by Bloomberg show.
Minutes from the latest Fed meeting indicated the central bank may reduce monetary stimulus in coming months. Four out of five investors expect the Fed to delay a decision to begin reducing the stimulus until March 2014 or later, according to the Bloomberg Global Poll of investors, traders and analysts who are subscribers. Just 5 percent are looking for a move at its Dec. 17-18 meeting, the Nov. 19 poll showed.
“The most bullish thing you could have is the Fed says, ‘Hey, we feel comfortable enough to step away,’” Warren Koontz, the co-manager of the Loomis Sayles Value Fund in Boston, said in a phone interview. Loomis Sayles & Co. manages about $191 billion. “The underpinning of the stock market is probably pretty good.”
The S&P 500 last week capped its longest winning streak since February as reports showed retail sales beat estimates and fewer Americans than expected filed for jobless benefits.
Data today from the National Association of Realtors showed pending home sales fell 0.6 percent in October, a fifth month of declines, amid higher borrowing costs. The median projection in a Bloomberg survey of economists called for a 1 percent gain from the month before.
“The real strong rebound in housing that we saw between 2011 and the first quarter of this year has tapered off now,” Charlie Smith, chief investment officer of Pittsburgh-based Fort Pitt Capital Group Inc., said in a phone interview. His firm oversees $1.5 billion. “The question people have is, ‘Can the uptrend in housing be sustained by what classically has been growth in income and therefore the ability to get loans?’”
The Chicago Board Options Exchange Volatility Index rose 4.3 percent today to 12.79. The gauge of S&P 500 options known as the VIX trimmed its 2013 decline to 29 percent.
Seven of the 10 main S&P 500 groups fell. Energy shares slumped 0.8 percent for the worst performance, as prices for crude, gasoline and heating oil fell following the interim deal with Iran.
Schlumberger (SLB), the world’s largest oilfield services provider, dropped 3.2 percent to $89.81. Noble, an offshore rig contractor, slipped 4.1 percent to $37.94.
ADT Corp. slumped 5.8 percent to $41.46. The largest provider of home security agreed to buy back 10.2 million shares from Corvex Management LP for $44.01 each. Keith Meister, founder of Corvex, will resign from ADT’s board of directors.
The Bloomberg U.S. Airlines Index added 1.6 percent to the highest level since February 2007, on optimism a decline in fuel costs will help profit. Delta Air Lines Inc. rose 2 percent to a record $29.17 and United Continental Holdings Inc. gained 3.4 percent to $39.83.
Alcoa gained 3.8 percent to $9.59. Goldman Sachs Group Inc. upgraded the shares of the largest U.S. aluminum maker to buy from neutral. The brokerage said the stock may climb to $11.
“We believe that the market is not fully appreciating Alcoa’s solid position in growing value-added and high-margin aluminum products for the aerospace and automotive industries,” analysts Sal Tharani and Chelsea Bolton wrote.
Caterpillar added 1.8 percent to $84.40. Bank of America Corp. raised the world’s largest maker of mining equipment to buy from neutral, saying the power-systems business will help earnings next year.
Health-care companies rose the most among 10 S&P 500 industries, climbing 0.4 percent. Mylan Inc., a generic drugmaker, advanced 3.6 percent to $44.22. The stock has gained 11 of the past 12 sessions to close at a record. Biogen Idec Inc. increased 3.6 percent to $295.88.
DaVita HealthCare Partners Inc., a provider of kidney care services, jumped 8.9 percent to $61.55 for the biggest gain in the S&P 500. U.S. regulators scrapped a proposed 9.4 percent reduction in Medicare payments to dialysis providers.
Laszlo Birinyi, president of Birinyi Associates Inc., said the four-year bull market will keep going because optimism about the rally hasn’t overtaken concern about company earnings and valuations.
The lack of exuberance shows people aren’t fully invested and have money left to buy shares, according to Birinyi, one of the first money managers to advise clients to buy in 2009.
“We still haven’t heard the story about the barista in Starbucks who’s made a lot of money in the market,” he said in an interview on Bloomberg Television’s “Street Smart” with Trish Regan and Adam Johnson on Nov. 22. “We’re not there yet.”
Investors have added to options that provide protection in the event of a market plunge, based on the CBOE SKEW Index. The gauge uses the prices of short-term, out-of-the-money S&P 500 options to calculate the market’s perception of the probability for a tail-risk event.
The SKEW index rose to 137 on Nov. 18 as the Fed considered scaling back its bond-purchasing program and American lawmakers prepared for another round of budget talks.
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