Most U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for the third time in four days, as data from China to Japan and Europe increased concern that a global economic slowdown is worsening.
Caterpillar Inc. and Citigroup Inc. fell more than 1 percent to pace losses among the largest companies. Norfolk Southern Corp. tumbled 9.1 percent as the rail carrier’s outlook trailed analysts’ projections. Bed Bath & Beyond Inc. retreated 9.8 percent after reporting second-quarter profit below expectations. ConAgra Foods Inc. rose 6.2 percent after raising its quarterly dividend and boosting its profit forecast.
The S&P 500 lost 0.1 percent to 1,460.26 at 4 p.m. in New York, trimming an earlier decline of as much as 0.8 percent. The Dow Jones Industrial Average rose 18.97 points, or 0.1 percent, to 13,596.93. Nine stocks fell for every five advancing on U.S. exchanges at 4 p.m., with about 6.2 billion shares trading hands, almost in line with the three-month daily average.
“We had a strong rally based on aggressive central bank actions, this week we’re getting the reality that economic activity is weak,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “The slowdown in China is not over and it is likely that Europe will officially enter into a recession.”
Stocks fell early in the day as global data added to concern about the economy. A Chinese manufacturing survey pointed to an 11th month of contraction and Japan’s exports fell in August. A separate report showed euro-area services and manufacturing output fell to a 39-month low in September.
In the U.S., more Americans than forecast filed unemployment claims last week and a gauge of leading indicators fell in August. Manufacturing in the Philadelphia region shrank for a fifth straight month in September.
“Investors are looking at each and every economic report to see if the Fed’s promise to save the economy will work,” Jeffrey Sica, the Morristown, New Jersey-based president of SICA Wealth Management who helps oversee more than $1 billion of assets, said in a phone interview yesterday. “So far the economy is still showing it’s in trouble.”
Equities pared losses late in the day as the Financial Times reported European Union authorities are helping Spain craft an economic reform program, citing unnamed officials. Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the U.S. central bank should hold the main interest rate near zero until unemployment falls below 5.5 percent.
Kocherlakota’s comments marked the first time he has linked policy to a specific economic goal. As recently as May, he said the central bank may need to begin an exit from record stimulus as early as year-end.
“Spain moving toward applying for a rescue packing would be bullish for equities,” Frederic Dickson, who helps oversee about $32 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a phone interview. “A lot the money from the Fed’s bond-buying program is going to end up coming back into the financial market, providing a safety net under stocks.”
The S&P 500 climbed to the highest level since 2007 last week after the policy-setting Federal Open Market Committee announced a new round of quantitative easing to spur growth and job creation, while forecasting that the benchmark interest rate will stay at a record low through at least mid-2015. The S&P 500 has advanced 16 percent in 2012, reaching its highest price relative to its members’ expected profits since 2010, as central banks stepped up their effort to sustain growth.
Industrial, financial and technology companies declined the most among 10 groups in the S&P 500 today, slipping more than 0.2 percent. The Morgan Stanley Cyclical Index fell 1 percent. Caterpillar, the largest maker of construction and mining equipment, lost 1.5 percent to $92.54. Citigroup slid 1.1 percent to $33.81. Alcoa Inc., the largest U.S. aluminum producer, tumbled 2.3 percent to $9.25, while Freeport-McMoRan Copper & Gold Inc. dropped 1.5 percent to $40.93.
Norfolk Southern declined 9.1 percent to $66.11. Third-quarter profit will miss analysts’ estimates as dwindling volumes at the second-biggest eastern U.S. railroad add to signs of a slowing domestic economy. A drop in coal carloads and merchandise shipments will offset container-freight gains, paring revenue by about $120 million for the three months ending Sept. 30, the company said late yesterday.
Norfolk Southern’s peers also retreated. Union Pacific Corp., the largest U.S. railroad, fell 3.3 percent to $120.95, while CSX Corp. dropped 5.7 percent to $21.49. The Dow Jones Transportation Average tumbled 2.8 percent for its biggest decline since June 1.
“Investors are really now focusing back to the economy and earnings. We had some lousy earnings from Bed Bath & Beyond and the railroads,” said Jack Ablin, who helps oversee about $65 billion of assets as chief investment officer of Harris Private Bank in Chicago.
Bed Bath & Beyond, the operator of more than 1,000 home-furnishing stores, dropped 9.8 percent to $62.08. The company has been resorting to discount coupons to drive traffic, cutting into profit margins, Brian Nagel, an analyst at Oppenheimer & Co. in New York, wrote in a Sept. 18 note. The company’s long-term growth prospects look better as the U.S. housing market picks up, he said.
J.C. Penney Co. fell 11 percent to $25.83 for the biggest decline in the S&P 500. Piper Jaffray & Co. said today it cannot ignore that the department store chain’s traffic remains “sharply negative.”
ConAgra Foods rose 6.2 percent to $27.24. The maker of Orville Redenbacher’s popcorn and Banquet frozen meals raised its quarterly dividend and boosted its full-year profit forecast. Chief Executive Officer Gary Rodkin said the company’s first-quarter results showed a “strong start to fiscal 2013” and cited gains in its potato business and contributions from acquisitions.
Skyworks Solutions Inc. tumbled the most in the Russell 1000 Index, losing 18 percent to $24.03. Investors were disappointed with the wireless semiconductor company’s projections for chip supplies to Apple Inc.’s iPhone 5 during an analyst day event, Frederic Ruffy, a senior options strategist at WhatsTrading.com, wrote in a note to clients.
Trading of futures linked to the benchmark for U.S. options prices has risen to a record as investors seek to protect gains in stocks that are approaching all-time highs.
More than 190,000 futures on the Chicago Board Options Exchange Volatility Index changed hands on Sept. 13, the most since the contracts started in 2004, according to data compiled by Bloomberg. That brought the average daily volume to almost 152,000 last week, a record. The VIX fell 41 percent this year through yesterday, leaving the gauge near a five-year low.
Jonathan Golub, UBS AG’s New York-based chief market strategist, raised his 2012 year-end target for the S&P 500 to 1,525 from 1,375, citing stronger-than-expected central bank actions. The forecast is below the benchmark gauge’s high of 1,565.15 set on Oct. 9, 2007.
“Markets appear very much backstopped from meaningful losses by the Fed and the ECB,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $250 billion in assets. “I think that has played out exactly this week, open modestly lower and fight our way back to flat or positive.”