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U.S. Stocks Fall as S&P 500 Completes Best September Since 1939

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Sept. 30 (Bloomberg) -- U.S. stocks fell, trimming the biggest September gain since 1939 for the Standard & Poor’s 500 Index, as investors sold some of the month’s best-performing shares amid speculation that improving economic data will reduce the need for the Federal Reserve to stimulate growth.

Caterpillar Inc., which has rallied 21 percent in September for the top gain in the Dow Jones Industrial Average, fell 1.6 percent to lead the 30-stock gauge lower today along with biggest decliner American Express Co., which fell 2.3 percent. Apple Inc., up 17 percent this month, slumped 1.3 percent. Occidental Petroleum Corp. gained 2.2 percent, leading a measure of energy stocks to the only rise among 10 groups in the S&P 500.

The S&P 500 slipped 0.3 percent to 1,141.20 at 4 p.m. in New York, paring its monthly advance to 8.8 percent and its third-quarter gain to 11 percent. The Dow slid 47.23 points, or 0.4 percent, to 10,788.05.

“Things were due for a pause, this being the last day of the quarter,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “Nothing goes up in a straight line,” he said. “We’ve had a hard time making an attempt at higher highs. You’re seeing traders exit positions and lock in gains for the quarter.”

All 10 industry groups in the S&P 500 and all 30 stocks in the Dow have gained in September, turning both measures positive for 2010, amid speculation the world’s largest economy will avoid slipping back into a recession and bets that the Federal Reserve will buy more debt to support the recovery.

‘Profit Taking’

Even after the rally, the S&P 500’s valuation of 12.5 times projected earnings over the next 12 months compares with a 16.5 average since 1954 using reported results, according to data compiled by Bloomberg.

“With U.S. equities up a lot this month and this quarter, there’s some quarter-end balancing,” said Giri Cherukuri, money manager and head trader at Oakbrook Investments in Lisle, Illinois, which manages $2.2 billion. “People had a lot of gains on the books, so it’s a little bit of profit-taking at month-end.”

Stocks climbed earlier as government data showed the U.S. economy grew at a 1.7 percent annual rate in the second quarter, faster than the 1.6 percent previously estimated. Initial jobless claims decreased by 16,000 to 453,000 in the week ended Sept. 25, lower than the median forecast of economists surveyed by Bloomberg News. The Institute for Supply-Management Chicago Inc. said business activity unexpectedly accelerated.

ISM Tomorrow

Stocks began paring gains as a measure of factories in the Milwaukee region trailed estimates, spurring concern that tomorrow’s ISM national manufacturing index will lag behind forecasts.

Philadelphia Fed President Charles Plosser said yesterday he opposes more monetary expansion to support the economy in part because he sees “little risk” of deflation. Boston Fed President Eric Rosengren said further large-scale purchases of securities would depend on the outlook and incoming data.

“The market’s been in a denial rally,” said Scott Armiger, who helps manage about $5.6 billion at Christiana Bank & Trust in Greenville, Delaware. “It’s overrated the good data and underrated the bad data. I’m kind of worried about October,” he said. “Today’s the last day of the month. It may be some ‘September’s been great. Let’s take some money off the table.’”

Caterpillar, the world’s largest maker of earth-moving equipment, slipped 1.6 percent to $78.68. American Express declined 2.3 percent to $42.03. Apple, maker of the iPhone and the iPad computer tablet, decreased 1.3 percent to $283.75.

Occidental Petroleum rose 2.2 percent to $78.30 as energy stocks rose 0.1 percent. Crude oil advanced as much as $80.18, a seven-week high, completing the biggest monthly gain since May 2009.

Prudential, AIG

Prudential Financial Inc. fell 4.2 percent to $54.18. The insurer said it expects the two Japanese life insurance units it’s buying from American International Group Inc. to earn less investment income because of Prudential’s lower tolerance for risk.

AIG Star Life Insurance Co. and AIG Edison Life Insurance Co. would have earned about $100 million less on investments last year if Prudential were managing the portfolios, Mark Grier, vice chairman of the Newark, New Jersey-based insurer, said today on a conference call with analysts.

AIG rose 4.4 percent to $39.10, the second-biggest gain in the S&P 500, as the rescued insurer agreed to wind down its $182.3 billion bailout by converting the government’s stake into common shares for sale. The U.S. Treasury Department will convert its preferred stake of about $49.1 billion for 1.66 billion shares of common stock and then sell the holdings in the open market.

Hertz, Education Stocks

Hertz Global Holdings Inc. fell the most in the Russell 1000 Index, dropping 8.8 percent to $10.59. Dollar Thrifty Automotive Group Inc.’s shareholders rejected the car rental company’s $1.46 billion takeover offer a day after Avis Budget Group Inc. added a breakup fee to its higher bid.

For-profit education stocks rose after Senator Tom Harkin said today at a hearing into the schools’ practices that the dropout rate at 16 for-profit schools was 57 percent over a three-year period. DeVry Inc. rose 5 percent to $49.21, the biggest gain in the S&P 500.

Staffing companies advanced after the bigger-than-expected decrease in jobless claims. Monster Worldwide Inc. climbed 1.3 percent to $12.96. Robert Half International Inc. rose 2.4 percent to $26.

To contact the reporter on this story: Inyoung Hwang in New York at

To contact the editor responsible for this story: Nick Baker at