Stocks Retreat After Early Gain Sent S&P 500 to Record

Photographer: Jin Lee/Bloomberg

Traders work on the floor of the New York Stock Exchange. Close

Traders work on the floor of the New York Stock Exchange.

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Photographer: Jin Lee/Bloomberg

Traders work on the floor of the New York Stock Exchange.

U.S. stocks fell, led by biotechnology companies amid concern about government scrutiny of drug prices, after the Standard & Poor’s 500 Index rose to a record earlier on optimism about the economy.

Gilead Sciences Inc. slid 4.6 percent and Biogen Idec Inc. tumbled the most since 2008 as lawmakers questioned Gilead about its $84,000 hepatitis drug. Symantec Corp. slumped 13 percent after firing its chief executive officer. About 9.9 billion shares changed hands in the U.S., the most since June, amid a quarterly event known as quadruple witching when futures and options contracts on indexes and individual stocks expire.

“It’s a combination of it being witching day, plus the continuation of uncertainty on the geopolitical front,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $150 billion of assets, said in a telephone interview. “That’s forced the traders to square their books going into the weekend. Days like this are typically volatile.”

The S&P 500 lost 0.3 percent to 1,866.52 at 4 p.m. in New York. The gauge climbed 1.4 percent this week and earlier today rose above its previous intraday record reached March 7. The Dow Jones Industrial Average slipped 28.28 points, or 0.2 percent, to 16,302.77 after climbing as much as 125 points earlier.

Resistance Levels

Stocks erased gains today after the S&P 500 reached levels it has repeatedly failed to surpass this month. Before today, its previous intraday high was 1,883.57, reached March 7, and the gauge touched 1,881.94 on March 6 and 1,882.35 on March 11.

The S&P 500 yesterday recovered most of its drop from March 19 when Federal Reserve Chair Janet Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise about six months later. Stocks gained yesterday as data on leading indicators and regional manufacturing fueled economic optimism, overshadowing concern that interest rates may rise in the middle of next year.

Three rounds of Fed stimulus and low interest rates have helped boost the equity gauge as much as 178 percent from a 12-year low as U.S. stocks enter the sixth year of a bull market.

Fed policy makers met this week as economic reports indicated the economy is pulling out of a slowdown linked to unusually harsh winter weather. Data this week showed factory production rose in February by the most in six months, a month after snowstorms hampered deliveries of parts and materials.

‘Underlying Strength’

“Growth in economic activity slowed during the winter months, in part reflecting adverse weather conditions,” the Fed said. Even so, “there is sufficient underlying strength in the broader economy to support ongoing improvement in labor-market conditions,” the central bank said.

Reports on housing, gross domestic product and durable goods are among the economic data due next week.

President Barack Obama is turning a European trip originally focused on nuclear security and trade into a mission to mobilize international opposition to Russia’s annexation of Crimea. White House National Security Advisor Susan Rice said Russian president Vladimir Putin’s moves to claim Crimea from Ukraine have prompted the U.S. and Europe to reevaluate their post-Cold War relationship with Russia.

Falling Volatility

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility, increased 3.3 percent to 15. The index has fallen 16 percent in the past five days.

Six of the 10 main groups in the S&P 500 advanced today, with utilities rallying 0.8 percent to lead gains while health-care, technology and consumer-discretionary companies led declines.

The Nasdaq Biotechnology Index slumped 4.4 percent, the most since October 2011, after Gilead Sciences was asked by U.S. House Democrats to explain how the company set its $84,000 price for hepatitis C treatment Sovaldi. The lawmakers also asked Gilead Chief Executive Officer John Martin to explain what is being done to make sure the medicine gets into the hands of low-income patients, especially in government-run health programs.

Gilead slid 4.6 percent to $72.07, its lowest price since December. Alexion Pharmaceuticals Inc. sank 8 percent to $159.79 and Biogen Idec Inc. tumbled 8.2 percent to $318.53, the biggest declines since 2008 for both.

Symantec dropped 13 percent to $18.20 for its biggest loss since July 2009. The largest maker of security software for personal computers fired President and CEO Steve Bennett after less than two years on the job as the company struggles with a shift to mobile devices.

Nike Drops

Nike Inc. slid 5.1 percent to $75.21 for its biggest slide since June 2012. The world’s largest sporting-goods company signaled that momentum may slow as the strong dollar hampers its performance abroad. The company posted third-quarter profit and sales that topped estimates.

Ann Inc., the owner of the Ann Taylor clothing brand, rose 13 percent to $42.05, the highest since October 2006. Golden Gate Capital Corp. took a 9.5 percent stake in the women’s apparel retailer. The private equity firm is now the company’s largest shareholder.

LIN Media LLC surged as Media General Inc. agreed to buy the owner of local TV stations in a deal valued at about $1.6 billion. LIN Media shares jumped 22 percent to $26.32, its biggest gain since May 2009. Media General rose 0.6 percent to $17.44. Media General will add local TV stations across the U.S. to get better negotiating leverage with advertisers and cable providers.

Darden Restaurants

Darden Restaurants Inc. advanced 2.8 percent to $50.66. The owner of Olive Garden and Red Lobster restaurants reaffirmed its forecast for 2014 profit.

Genco Shipping & Trading Ltd. jumped 24 percent to $1.54 after saying it remains in talks about a potential debt restructuring. The company, which has made an interest payment of $3.1 million, is still in talks with lenders and note holders regarding a potential debt restructuring.

Zions Bancorporation fell 5.3 percent to $31.24. The Fed said 29 of the 30 largest banks subjected to annual stress tests have sufficient capital to withstand a deep recession while continuing to pay dividends. Zions is the only lender that came in below one of the Fed’s main capital thresholds.

Financial stocks were little changed as a group. All 30 banks, including Zions, exceeded the minimum in a separate scenario of rising interest rates, a sign of improved capital levels in the banking system since the 2008 financial crisis.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Michael P. Regan

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