Most U.S. stocks fell after paring early losses for a second day, as investors weighed prospects of economic growth with concern the Federal Reserve will reduce stimulus efforts.
Gap Inc. and Abercrombie & Fitch Co. slipped more than 1.7 percent after their earnings forecasts trailed analyst projections. Sears Holdings Corp. sank 14 percent as the retailer controlled by billionaire hedge-fund manager Edward Lampert posted a loss. Procter & Gamble Co. surged 4 percent after replacing Chief Executive Officer Bob McDonald with his predecessor, A.G. Lafley.
The Standard & Poor’s 500 Index fell 0.1 percent to 1,649.60 at 4 p.m. in New York, after sinking as much as 0.8 percent earlier. The Dow Jones Industrial Average added 8.60 points, or 0.1 percent, to 15,303.10, recovering from a 95-point loss. About 10 stocks fell for every 9 that rose and 5.2 billion shares changed hands on U.S. exchanges, 16 percent below the three-month average. U.S. markets will be closed May 27 for the Memorial Day holiday.
“People are still mindful of what the Fed may do as the year progresses,” Robert Pavlik, chief market strategist at Banyan Partners LLC, said in a phone interview from New York. His firm manages about $1.4 billion. “They want to look at the dip and see if it turns into something. If it does not turn into anything, they seem to be coming in in the afternoon. That seems to be the pattern every single day.”
Investors trying to explain the resilience of American equities during a global selloff may want to consider the pace that companies are repurchasing shares.
About 79 percent of buyback orders at Goldman Sachs Group Inc.’s corporate trading desk were active yesterday, the most this year, according to a note to clients obtained by Bloomberg News. Companies stepped up purchases as the S&P 500 fell as much as 3 percent from an intraday record reached May 22.
The buybacks may have limited losses in American equities after shares in Japan fell the most in two years and stock markets from London to Paris and Frankfurt saw declines of more than 2 percent. The S&P 500 closed yesterday down 0.3 percent.
The index fell 1.1 percent this week, the most in more than one month, after a contraction in China manufacturing offset American housing data and investors weighed comments from Fed Chairman Ben S. Bernanke, who said on May 22 that the pace of asset purchases, known as quantitative easing, could be cut “in the next few meetings” if economic conditions improve.
That was a departure from previous statements from Bernanke where he stressed that policy will remain “highly accommodative,” Kevin Logan, chief U.S. economist at HSBC Holdings Plc, wrote in a report to investors this week. The S&P 500 has surged 144 percent since March 2009 as the Fed pumped more than $2 trillion into markets to boost economic growth.
“The market is trying to price in that at some point in time the Fed is going to take their foot off the gas pedal,” Arvin Soh, a portfolio manager with GAM USA Inc. in New York, said by phone. His firm had $53.3 billion in assets under management as of Dec. 31. “That’s because growth is picking up and is sustainable. That should ultimately be a good thing. The problem is everyone is long risk. When one thing gets triggered, that automatically causes selling and it feeds itself.”
Concern that the Fed will reduce its monthly bond purchases grew today as a report showed orders for U.S. durable goods increased more than forecast in April, pointing to gains in business investment that will help manufacturing rebound in the second half of the year.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.6 percent to 13.99 for its fifth straight gain, its longest advance of the year. The equity volatility gauge, which moves in the opposite direction to the S&P 500 about 80 percent of the time, has jumped 12 percent this week.
Eight out of the 10 main industry groups in the S&P 500 declined, led by a 1 percent drop in utility companies. Energy and phone stocks fell at least 0.3 percent.
Gap, the largest U.S. apparel chain, slid 1.7 percent to $40.64. While first-quarter profit rose to 71 cents a share, exceeding the 69-cent top end of its forecast, the company maintained its projection that earnings this year will be $2.52 to $2.60. Analysts estimated $2.72, on average.
Abercrombie & Fitch tumbled 8 percent to $50.02 after the clothing retailer cut its earnings forecast. The company said its full-year profit may be $3.15 to $3.25 a share, down from a previous estimate for $3.35 to $3.45.
Sears sank 14 percent to $50.25. The retailer reported a first-quarter loss of $2.63 a share as revenue fell 8.8 percent to $8.45 billion. The stock tumbled 19 percent earlier in the session, the biggest intraday drop since Nov. 16, cutting the value of Lampert’s controlling stake by as much as $639 million.
Salesforce.com Inc., the biggest maker of online customer-management tools, dropped 5.3 percent to $43.25. Profit excluding some items for the fiscal second quarter will be 11 cents to 12 cents a share, the company said. That compared with analysts’ average estimate for profit of 12 cents, according to data compiled by Bloomberg.
GameStop Corp., the world’s largest video-game retailer, tumbled 11 percent to $32.11. Retailers may keep as little as 10 percent of the revenue from sales of used Microsoft Corp.’s Xbox One games, MCV said on its website, citing ConsoleDeals.co.uk.
P&G surged 4 percent, the most in the Dow, to $81.88. The world’s largest consumer products maker is changing CEOs as it struggles to rekindle growth at home and abroad. McDonald will retire June 30 after 33 years at the company, P&G said.
Intuitive Surgical Inc. gained 4.8 percent to $501.53. The company convinced a Washington state jury that it wasn’t negligent in its training of a doctor who performed a robot-assisted surgery on a patient who later died. The case was the first to go to trial of at least 26 lawsuits against Intuitive alleging injuries tied to its da Vinci robotic system, which was used in more than 300,000 U.S. operations last year.
Valeant Pharmaceuticals International Inc. jumped 13 percent to a record $84.47. Canada’s largest drugmaker is close to acquiring Bausch & Lomb, the eye-care company owned by Warburg Pincus LLC, for about $9 billion, according to a person familiar with the negotiations.