U.S. stocks fell, trimming a second monthly advance in the Standard & Poor’s 500 Index, as investors awaited the Federal Reserve’s monetary-policy decision tomorrow.
Coach Inc., the largest U.S. luxury handbag maker, tumbled 19 percent after reporting revenue that trailed analysts’ estimates. Humana Inc. slumped 13 percent as the provider of Medicare benefits cut its 2012 profit forecast. Apple Inc. rose 2.6 percent as Sanford C. Bernstein & Co. said it is considering a stock split that could prompt the world’s most valuable company to be added to the Dow Jones Industrial Average.
About five stocks fell for every three that rose on U.S. exchanges at 4 p.m. New York time. The S&P 500 slid 0.4 percent to 1,379.32. The benchmark measure rose 1.3 percent in July. The Dow average slid 64.33 points, or 0.5 percent, to 13,008.68 today. Volume for exchange-listed stocks in the U.S. was 6.7 billion shares, or about in line with the three-month average.
“People are taking some chips off the table as they don’t expect the Fed to come up with any positive surprise,” said Michael Holland, chairman of New York-based Holland & Co. His firm oversees more than $4 billion. “In addition, you have a mixed bag of earnings and news out of Europe is not helping.”
Equities fell on bets the Fed may forgo announcing a third round of large-scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt. Policy makers meeting today and tomorrow may wait for more employment data before deciding whether action is needed to boost an economy that’s slowed for two straight quarters.
Consumer spending in the U.S. stagnated in June as labor-market weakness prompted Americans to use the biggest gain in incomes in three months to build savings. Yet Americans may be growing less pessimistic about job prospects later in the year, with another report today showing consumer confidence rose unexpectedly for the first time in five months.
U.S. equities followed a slump in European shares after companies including BP Plc and UBS AG posted earnings that missed forecasts. In the U.S., 60 percent of the companies which reported second-quarter results missed sales estimates, according to data compiled by Bloomberg. About 73 percent beat profit estimates, the data showed.
Companies which rely on consumer discretionary spending lost 1.2 percent for the biggest decline among 10 S&P 500 groups. Coach tumbled 19 percent, the most since 2001, to $49.33. Sales at North American stores open at least a year advanced 1.7 percent, compared with a gain of 10 percent a year earlier. Jennifer Davis, an analyst at Lazard Capital Markets, projected an increase of 5 percent.
Humana dropped 13 percent, the biggest decline since 2009, to $61.60. The company generated three-quarters of sales last year from Medicare, the U.S.-backed program for the elderly and disabled, and Chief Executive Officer Michael B. McCallister said that new members were proving more expensive.
Archer Daniels Midland Co. slumped 5.1 percent to $26.09. The largest corn processor reported fiscal fourth-quarter profit that missed analysts’ estimates as its ethanol business swung to a loss and the U.S. drought increases corn costs.
Facebook Inc. dropped 6.2 percent to $21.71, the lowest price on record. The shares are trading 43 percent below the company’s initial public offering price of $38. Facebook, the largest social-networking service, last week reported second-quarter results that showed slowing growth.
U.S. shares of UBS slumped 4.2 percent to $10.60. Switzerland’s biggest bank said second-quarter profit fell 58 percent, missing analysts’ estimates, as the investment bank posted a loss tied to Facebook’s initial public offering.
RealD Inc. retreated 23 percent to $9.70. The supplier of 3-D projection systems to theaters reported quarterly profit that missed analysts’ estimates because of costs to supply theaters with new eyeglasses.
Gains in technology companies, the biggest group in the S&P 500, limited the benchmark measure’s decline. Apple rallied 2.6 percent, the most since May 21, to $610.76. The company’s decision in March to pay its first dividend in 17 years makes it more likely the stock could be added to the index after a split, said Toni Sacconaghi, an analyst at Bernstein who rates the shares outperform, in a report today.
“We see the timing as ripe,” Sacconaghi said. “Apple’s initiation of a dividend brings the company in line with all other Dow components. We note that Apple is currently the only company above $215 billion in market cap that pays a dividend and is not included in the Dow.”
The Cupertino, California-based company is preparing to introduce the next version of the iPhone on Sept. 12 in what will be a design overhaul of its top-selling product, according to two people with knowledge of the company’s plans.
Pfizer Inc. climbed 1.4 percent, the most in the Dow, to $24.04. The world’s largest drugmaker said it will file in mid-August to sell as much as 20 percent of its animal-health unit in an initial public offering. The company also reported profit that beat analyst estimates as a result of cost cutting.
Goodyear Tire & Rubber Co. rose 10 percent to $11.45. The largest U.S. tiremaker reported a second-quarter profit that beat analysts’ estimates and lowered its full-year forecast for tire sales for the second time this year.
Cummins Inc. jumped 6 percent to $95.90. The maker of truck engines reported second-quarter earnings excluding some items of $2.45 a share, beating the average analyst estimate in a Bloomberg survey of $2.28 a share.
U.S. Steel Corp. rallied 9.1 percent to $20.65. The country’s largest producer of the metal reported earnings that beat estimates after demand rose for tubular products.
Valero Energy Corp. jumped 5.4 percent to $27.50. The largest U.S. refiner by processing capacity said second-quarter profit rose as access to cheaper crude produced in the U.S. led to a rally in the margin between oil costs and fuel prices. Valero plans to separate its retail business to “unlock value” for its shareholders.
Dun & Bradstreet Corp. soared 13 percent, the most in the S&P 500, to $80.19. The operator of a database that provides credit and business data to firms is weighing a sale, said a person familiar with the matter.
AmerisourceBergen Corp. climbed 3 percent to $39.70. The third-biggest U.S. drug distributor won an $18.5 billion contract to supply Express Scripts Holding Co.
Investors should buy stocks before the Fed’s announcement tomorrow, if history is of any guide, according to Bespoke Investment Group LLC.
The S&P 500 has advanced in 20 out of the past 29 decision days since the Fed pledged to keep interest rates near zero in December 2008, a study from Harrison, New York-based Bespoke shows. While Fed days made up 3 percent of the trading days during the period, they accounted for about 38 percent of the equity gauge’s gain, the data show.
“‘Don’t fight the Fed’ is one of the most well-known market axioms around, and these performance numbers couldn’t do a better job of highlighting why,” Justin Walters, Bespoke’s co-founder, wrote in a note today.
The S&P 500 has rallied 9.7 percent this year amid speculation that worse-than-expected economic data will prompt the Fed to take more actions to spur growth.
The Fed has carried out two rounds of so-called quantitative easing since Lehman Brothers Holdings Inc. collapsed in 2008, buying $2.3 trillion in bonds to boost the economy. The S&P 500 jumped 59 percent during the 913 trading days from December 2008 through yesterday, with return on the Fed days totaling 22 percent, data from Bespoke and Bloomberg show. The average gain on the past 29 Fed days was 0.7 percent.