U.S. stocks retreated, pulling the Standard & Poor’s 500 Index down from a 32-month high, after a report showed retail sales increased less than forecast and Exxon Mobil Corp. led a decline in energy producers.
Exxon Mobil, the world’s largest company, slid 2.3 percent for its biggest drop since August as investors analyzed data on its proved reserves. Monsanto Co. sank 4.8 percent as billionaire investor George Soros’s hedge fund cut its stake in the world’s largest seed company. JDS Uniphase Corp., the biggest U.S. network-analysis company, fell 10 percent after Sanford C. Bernstein & Co. reduced its rating.
The S&P 500 retreated 0.3 percent to 1,328.01 at 4 p.m. in New York, snapping a three-day rally. The Dow Jones Industrial Average declined 41.55 points, or 0.3 percent, to 12,226.64. Commerce Department figures showed that January sales at U.S. retailers increased less than estimated by economists and may reflect the influence of harsh winter weather.
“It’s quite simple -- people are trying to discern between weather conditions and economic momentum,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $52.5 billion. “There’s been some confusion about the impact of the weather on the overall figures, as we saw with retail sales today. That adds up to some nervousness following a strong advance for stocks.”
Highest Since June
The S&P 500 gained 97 percent from a 12-year low in March 2009 through yesterday amid government stimulus measures and higher-than-estimated corporate profits. The advance pushed the index to 15.9 times the reported operating earnings of its companies, the highest valuation since June. Earnings-per-share have topped analysts’ estimates at about 73 percent of the 359 companies in the S&P 500 that reported results since Jan. 10, according to data compiled by Bloomberg.
Stock-index futures fell before the open of exchanges as Commerce Department figures showed that retail purchases rose 0.3 percent, the smallest gain since a drop in June. The median forecast of economists surveyed by Bloomberg News called for a 0.5 percent rise.
The Labor Department said the cost of goods imported into the U.S. rose more than forecast in January, boosted by higher prices for commodities such as fuels and food. The 1.5 percent month-over-month rise in the import-price index followed a revised 1.2 percent gain in December. Economists projected a 0.8 percent increase for January, according to the median estimate in a Bloomberg News survey. Excluding food and fuel, import prices climbed 0.6 percent.
“Surging inflation expectations show we are no longer in a Goldilocks environment and a meaningful tactical correction in risk assets could be caused by a jump in interest rates or weaker U.S. growth,” Gary Baker and Michael Hartnett, equity strategists at Bank of America Corp., wrote in a report today.
Money managers are more bullish on global stocks this month than at any time in the past decade, a BofA Merrill Lynch Global Research survey showed. A net 67 percent of respondents, who together manage $569 billion, had an “overweight” position on global equities, the highest level since the survey first asked the question in April 2001. That compares with 55 percent in January and 40 percent in December.
Energy and raw-materials producers had the biggest declines among 10 S&P 500 groups, falling about 1.1 percent collectively.
Exxon Mobil fell the most in the Dow average, declining 2.3 percent to $82.97. The company said engineers found larger-than-expected amounts of oil and natural gas in fields that came with its acquisition of XTO Energy Inc. Revised field estimates and discoveries at the end of 2010 added the equivalent of 3.5 billion barrels of crude to Exxon’s proved reserves, enough to replace 209 percent of last year’s production.
Excluding the acquisition, the reserve replacement ratio “would have only been 45 percent,” Paul Cheng, an analyst at Barclays Plc, wrote in a note today. The “poor organic replacement ratio” could reignite concern over whether Exxon acquired XTO only for reserves and production growth, he wrote.
Monsanto sank 4.8 percent to $71.54. The $27 billion Soros Fund Management cut its stake in the agricultural company to 3.29 million shares from 6.52 million in the previous quarter, according to the regulatory filing.
JDS Uniphase slumped 10 percent to $25.05 after its stock rating was cut to “market perform” from “outperform” at Sanford C Bernstein.
Netflix Inc. declined 2.7 percent to $240.79. The DVD-rental and streaming company was cut to “equal-weight” from “overweight” at Morgan Stanley.
Shares of exchanges slumped. Deutsche Boerse AG’s $9.53 billion all-stock purchase of New York Stock Exchange parent NYSE Euronext creates the world’s largest owner of equities and derivatives markets. The deal, which gives Deutsche Boerse 60 percent of the combined entity, forms an organization with market share in futures that’s similar to Chicago-based CME Group Inc. It would also top CBOE Holdings Inc. of Chicago in U.S. options.
Deutsche Boerse’s plan follows Singapore Exchange Ltd.’s October bid for ASX Ltd., which runs the Australian stock market, and London Stock Exchange Group Plc’s agreement last week to buy Canada’s TMX Group Inc.
NYSE declined 3.4 percent to $38.12. Nasdaq OMX Group Inc. slumped 4.6 percent to $28.28. CBOE fell 5.9 percent to $26.21.
Wyndham Worldwide Corp. rose the most in the S&P 500, jumping 6.9 percent to $31.74. The franchiser of Days Inn hotels and Super 8 motels may be under pressure to spin off its timeshare business after Marriott International Inc. announced a similar plan, Gabelli & Co. said in a note. Marriott gained 1.1 percent to $41.46.
Roubini Predicts Rally
U.S. Steel Corp. rallied 3.3 percent to $62.31. The country’s largest producer of the metal by volume was raised to “buy” from “neutral” at Goldman Sachs Group Inc., citing higher steel prices and demand.
Nouriel Roubini, the economist who predicted the 2009 financial crisis, said U.S. stocks may gain in the next few months as company earnings remain resilient.
“I think tactically for the next few months equities could rise because corporate profits are still strong,” Roubini, who is chairman and co-founder of Roubini Global Economics LLC, said in an interview on CNBC today, when asked for his outlook for the S&P 500. “But the question is whether the economic recovery is going to be sustained and whether some of the risks we’re seeing down the line on the financial markets are going to materialize.”