Jan. 30 (Bloomberg) -- U.S. stocks fell, dragging benchmark indexes from five-year highs, as the Federal Reserve said it will maintain its program to buy securities after the economy unexpectedly shrank in the fourth quarter.
Nine out of the 10 groups in the Standard & Poor’s 500 Index retreated as energy and industrial companies fell the most, dropping at least 0.6 percent. An index of homebuilders slipped 1.3 percent as Lennar Corp. declined 2.4 percent. Amazon.com Inc. jumped 4.8 percent after reporting gains in sales and North American operating margin. Facebook Inc. fell 1.4 percent in late trading after posting a drop in profit.
The S&P 500 fell 0.4 percent to 1,501.96 at 4 p.m. in New York. The Dow Jones Industrial Average lost 44 points, or 0.3 percent, to 13,910.42. Both measures yesterday reached their highest levels since 2007. The Russell 2000 Index slid 1.2 percent, falling from yesterday’s record high. About 6.8 billion shares traded hands on U.S. exchanges today, or 9.5 percent above the three-month average.
“The underlying trend for the market is upward, but the problem is there is some weakness in the economic numbers that I don’t think investors have fully factored in,” David Kelly, chief global strategist at JPMorgan Funds in New York, said by phone. His firm oversees about $400 billion. “It’s transitory as the Fed said. But when you put in a negative number on GDP for the fourth quarter, it’s hard for the market to rally.”
Fed Chairman Ben S. Bernanke has unleashed the power of the central bank to buy unlimited amounts of Treasury and mortgage-backed securities in a bid to end a four-year long period of unemployment above 7.5 percent and bolster the economy. The central bank said today it will keep purchasing securities at the rate of $85 billion a month as the economy paused because of temporary forces including bad weather.
“I do not think this is a surprise to anyone,” Randy Bateman, chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said in a telephone interview. His firm oversees $15 billion. “There have been speculations that the Fed will openly come to the end of this liquidity cycle. I don’t see that changing. It’s still more of status quo.”
Gross domestic product, the volume of all goods and services produced, dropped at a 0.1 percent annual rate in the fourth quarter, weaker than any economist forecast in a Bloomberg survey and the worst performance since the second quarter of 2009, when the world’s largest economy was still in the recession.
Companies in the U.S. added 192,000 workers in January, data from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 38 economists surveyed by Bloomberg called for an advance of 165,000.
The data came two days before a Labor Department report may show employers added 165,000 workers to payrolls this month while the unemployment rate was probably 7.8 percent, matching December and November as the lowest since the beginning of 2009, according to economists’ projections in a Bloomberg survey.
Economic reports are producing enough disappointing data to drag down U.S. stocks, according to Gina Martin Adams, a Wells Fargo & Co. strategist. The Citigroup U.S. Economic Surprise Index, which reflects the gap between economic figures for the previous three months and economists’ average estimates in Bloomberg surveys, last week dropped below zero for the first time since September.
“While stocks have started out the year on a strong note, economic indicators have not,” Martin Adams wrote in a report. “This does not bode well for the future direction of stock prices.”
The S&P 500 has risen 5.3 percent this month, the best start of a year since 1989, as lawmakers agreed on a budget compromise and companies reported better-than-estimated earnings. The index has more than doubled from a 12-year low in 2009 as the Fed increased its bond purchases to keep interest rates low and spur growth. The S&P 500 is about 4 percent below its record of 1,565.15 set in October 2007, while the Dow is less than 2 percent from its all-time high.
About 75 percent of the 195 companies in the S&P 500 that have released results so far in the quarter exceeded profit projections. Sixty-six percent have surpassed sales estimates, according to data compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, climbed 7.6 percent today to 14.32.
General Electric Co. and Exxon Mobil Corp. had the biggest declines in the Dow, each falling 1.2 percent. The Dow Jones Transportation Average dropped 1.5 percent after reaching an all-time high Jan. 28.
Union Pacific Corp. retreated 2.7 percent to $131.17. JetBlue Airways Corp. slid 4.4 percent to $5.80 after the airline was downgraded to underperform from market perform by Savanthi Syth, a Raymond James Financial Inc. analyst who cited the carrier’s “relatively high costs.”
An S&P index of homebuilders slipped from its highest level since July 2007. Lennar fell 2.4 percent to $41.60 and D.R. Horton Inc. retreated 3.2 percent to $23.06.
Facebook dropped 1.4 percent to $30.81 as of 4:52 p.m. in New York. The world’s largest social network said net income declined during the fourth quarter as the company ramped up investments in new mobile and ad services that boosted costs.
MeadWestvaco Corp. slipped 4 percent to $31.63. The packaging company reported adjusted earnings that trailed the average analyst estimate. Profit in the first quarter will be “modestly lower” from a year ago because of rising costs related to a Brazilian expansion and lower earnings from land sales, the company said.
Peabody Energy Corp. dropped 6.4 percent to $24.87. The coal producer was cut to sell from underperform by David Lipschitz, an analyst with Credit Agricole Securities (USA).
Fossil Inc. fell 2.4 percent to $104.11. The maker of the namesake watch brand was downgraded to sell from hold at Brean Capital LLC. The stock’s recent gain is “unwarranted” as demand is weakening from China to Europe, analyst Eric Beder said in a note.
Research In Motion Ltd. slumped 12 percent, the most since Dec. 21, to $13.78. The company renamed itself BlackBerry and unveiled the new BlackBerry 10 lineup, aiming to lure back customers who have defected to Apple Inc. and Samsung Electronics Co. The touch-screen phone called the Z10 starts at $199 with a wireless contract and will be available in March in the U.S.
Amazon surged 4.8 percent to $272.76. The world’s largest Internet retailer said fourth-quarter sales climbed 22 percent to $21.3 billion and its operating margin in North America widened to 5 percent from 2.9 percent a year earlier as it benefited from investments in warehouses and a jump in holiday shopping.
Chesapeake Energy Corp. rallied 6 percent to $20.11 after saying Chief Executive Officer Aubrey McClendon will retire on April 1 from the company he co-founded. McClendon was forced to leave the second-largest U.S. natural gas producer under pressure from his two biggest shareholders, said a person with knowledge of the matter.
Avery Dennison Corp. gained 6.4 percent, the second-most in the S&P 500, to $38.44. CCL Industries Inc., a maker of specialty packaging, agreed to acquire two businesses from Avery Dennison for $500 million in cash. Avery Dennison also posted fourth-quarter earnings that beat analysts’ estimates.
Boeing Co. rose 1.3 percent to $74.59. The company predicted earnings that met analysts’ estimates this year, assuming no drag from the grounding of its marquee 787 Dreamliner jet that’s stretching into a third week while investigators examine battery faults.
To contact the editors responsible for this story: Lynn Thomasson at email@example.com