April 1 (Bloomberg) -- U.S. stocks fell, pulling the Standard & Poor’s 500 Index lower after a record high, as a report showed American manufacturing expanded less than forecast in March as factories slowed production and orders waned.
Joy Global Inc., U.S. Steel Corp. and Freeport-McMoRan Copper & Gold Inc. tumbled more than 2.2 percent as industrial and raw-material shares paced declines among 10 S&P 500 groups. Intel Corp. and Micron Technology Inc. lost at least 1.9 percent as technology companies slumped. Hess Corp. gained 2.7 percent after MFP Investors LLC’s Michael Price said the company could be a takeover target.
The S&P 500 fell 0.5 percent to 1,562.17 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 5.69 points, or less than 0.1 percent, to 14,572.85. The Russell 2000 Index tumbled 1.3 percent to 938.79.
“The market is fairly sensitive at this level and that means we need continuing improvement in the economy to keep moving stocks forward,” Randall Warren, who oversees about $80 million including options as chief investment officer of Warren Financial Service in Exton, Pennsylvania, said yesterday in a phone interview. “We need good economic reports and we’re going to need good earnings reports later this month.”
About 5.2 billion shares changed hands on U.S. exchanges, 18 percent below the three-month average and the second-lowest level for the year. U.S. markets were closed March 29 for Good Friday. Markets in most of Europe were shut today.
The S&P 500 rose 0.4 percent on March 28 to reach its highest closing level. It remains below the all-time intraday high of 1,576.09. The gauge rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market. The Dow first passed its 2007 record on March 5.
The Institute for Supply Management’s factory index fell to 51.3 in March from 54.2 a month earlier, the Tempe, Arizona-based group said today. The median forecast of economists surveyed by Bloomberg was 54. A reading of 50 is the dividing line between growth and contraction.
A separate report showed construction spending in the U.S. rose in February, paced by the highest level of home building in more than four years. Data on March 29 showed consumer spending climbed in February by the most in five months and confidence unexpectedly improved in March, showing job-market gains are helping Americans overcome tax increases and concern about federal budget cuts.
Among global economic reports today, the Bank of Japan’s Tankan index showed pessimism among large manufacturers and data on South Korean exports and China factory output trailed forecasts.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, jumped 6.9 percent to 13.58 today. The gauge, known as the VIX, dropped 6.4 percent last week, and is down 25 percent for the year.
Industrial and raw-material shares dropped at least 1 percent. Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index down 1.2 percent and the Dow Jones Transportation Index lower by 1.5 percent.
Joy Global, the world’s largest maker of underground mining equipment, lost 3 percent to $57.75. Freeport-McMoRan, the world’s second largest copper miner, retreated 2.2 percent to $32.38, and U.S. Steel slipped 4 percent to $18.72. Alcoa Inc., the largest U.S. aluminum maker, fell 1.5 percent to $8.39.
Hess, the New York-based energy company, jumped 2.7 percent to $73.54 after MFP Investors’ Price said in a “Bloomberg Surveillance” television interview with Tom Keene and Sara Eisen today that the firm could be acquired at $80 to $90 a share.
“Hess is sitting there with trophy assets, huge position in the Bakkens,” Price said. “Somebody could surface and just pop an $80 to $90 bid.”
The company announced today an agreement to sell its holding in Russian subsidiary Samara-Nafta for $2.05 billion to OAO Lukoil.
J.C. Penney Co. slipped 2.1 percent to $14.80. Price, who made his reputation as a value investor in the 1980s by buying shares of beaten-down lenders, said that his investment in the department-store company has been “a big mistake.”
Shares of the department-store company plunged 66 percent since its February 2012 high as sales tumbled in the first year of a transformation plan under Chief Executive Officer Ron Johnson.
Technology stocks retreated 1 percent as a group. Boise, Idaho-based Micron Technology fell the most in the S&P 500, declining 6 percent to $9.38. Advanced Micro Devices Inc., the Sunnyvale, California-based chipmaker, slipped 4.3 percent to $2.44. Hewlett-Packard Co. erased 2.2 percent to $23.31 and Intel fell 1.9 percent for the biggest declines in the Dow.
The Bloomberg U.S. Airlines Index slipped 2 percent. United Continental Holdings Inc. dropped 3.3 percent to $30.97 after it was downgraded to equal-weight from overweight at Evercore Partners.
General Mills Inc., with food brands from Yoplait yogurt to Pillsbury cookie dough, slipped 1.3 percent to $48.68 after Morgan Stanley downgraded the shares to equal-weight from overweight.
Tesla Motors Inc. increased 16 percent to $43.93. The electric-car maker headed by billionaire Elon Musk reached “full profitability” as sales of its Model S sedan were more than 250 units higher than the 4,500 projected in mid-February, according to a company statement yesterday that didn’t specify the profit figure.
EBay Inc., operator of the largest online marketplace, added 2.8 percent to $55.71 after Canaccord Genuity Corp. equity analyst Michael Graham upgraded the shares to buy from hold. The 12-month target price is $67.
American Greetings Corp., the biggest publicly traded greeting-card maker, gained 12 percent to $18.05 after it agreed to be taken private by a group led by Chief Executive Officer Zev Weiss for about $524 million. The group, including Chairman Morry Weiss and Chief Operating Officer Jeffrey Weiss, offered $18.20 a share in cash, 27 percent more than the close of the Class A stock on Sept. 25, the day before the Weiss family first proposed to acquire the company.
Ruby Tuesday Inc. climbed 5.7 percent to $7.79 after Barron’s reported the casual dining chain may rise to $13 a share. Barron’s cited estimates by Cove Street Capital analysts, noting the restaurant chain has cut costs and focused on its core brand with “affordable” menus that could boost same-store sales.
The four-year bull market has sent the S&P 500 up more than 131 percent since it reached a 12-year low of 676.53 in March 2009. The rally is extending beyond the average length of bull markets, according to Birinyi Associates Inc. data that show cycles since 1962 have an average duration of four years. Of nine advances, four have lasted longer than the mean and the market rose for about six years during those periods.
The S&P 500 is trading closer to analyst price estimates than any time in at least seven years. Shares in the index are 5 percent away from analysts’ mean forecasts, according to data compiled by Bloomberg starting in 2006. That’s the smallest difference ever for the median stock and compares with the historical average of 14 percent.
Bulls say the narrowing spread shows securities firms were caught off guard by the rally and that equities will climb as they boost predictions. Bears say the slowness of analysts to respond means stocks have gotten so far ahead of themselves that even market optimists are uncomfortable with the increase, which has added more than $10 trillion to values since 2009.
“The market has moved so fast, it hasn’t given the analysts time to re-evaluate things,” Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in a March 26 phone interview. “As we just finished earnings season and we’re winding down the first quarter, analysts will begin the process of reassessing. My sense is we’re looking for better economic and corporate things than we’re seeing today.”
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