U.S. stocks fell after disappointing forecasts from Best Buy Co. and Campbell Soup Co. while investors awaited a speech from Federal Reserve Chairman Ben S. Bernanke to gauge the prospect of continued stimulus.
Best Buy slid 11 percent, the most in almost a year, after saying it will work to keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability. Campbell Soup fell 6.2 percent after cutting its profit forecast. Home Depot Inc. gained 0.9 percent after boosting its earnings forecast as rising home prices spurred homeowners to splurge on renovations. Tyson Foods Inc. climbed 4.6 percent for a sixth day of gains as sales beat analysts’ expectations.
The Standard & Poor’s 500 Index fell 0.2 percent to 1,787.87 at 4 p.m. in New York. Yesterday, the gauge briefly surpassed 1,800 for the first time. The Dow Jones Industrial Average lost 8.99 points, or less than 0.1 percent, to 15,967.03. About 5.8 billion shares changed hands on U.S. exchanges, about 3 percent below the three-month average.
“The economy is not doing badly, and the Fed is remaining very aggressive and very friendly toward the market,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion. “We’ve had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December.”
The S&P 500 is up 25 percent this year, putting it on track for the biggest annual gain since 2003, as the Fed kept its monetary stimulus to spur economic growth and corporate earnings topped analysts’ estimates.
Bernanke is scheduled to speak in Washington today after Fed Bank of New York President William Dudley said yesterday that while he’s “more hopeful” the U.S. economy is strengthening, it’s not enough to warrant stimulus cuts yet.
Chicago Fed President Charles Evans, among the most vocal advocates for additional easing from the Fed, said today that while the central bank is going to deliver highly accommodative policy until it can get the economy where it wants, the biggest challenge is credibility.
The Organization for Economic Cooperation and Development cut global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy may expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a report today. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May.
The Fed will release minutes of its October policy meeting tomorrow. The document will reveal more details behind the decision to press on with $85 billion in monthly asset purchases.
Policy makers will probably pare that pace to $70 billion at their March 18-19 meeting, according to the median estimate in a Bloomberg survey. Three rounds of monetary stimulus have helped propel the S&P 500 up 165 percent from a bear-market low in 2009.
Wall Street strategists have played catch-up in their U.S. stock-market forecasting for most of the year. Yesterday’s average prediction for the S&P 500 stood at 1,733, or almost 59 points below the index’s closing value. The gap dwindled to this year’s low of minus 70 points at the end of last week from a high of 84 points on Jan. 8.
John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York, today boosted his 2013 projection for the S&P 500 by 4.7 percent to 1,812, citing the market’s strength. The index will end next year at 2,014, he forecast.
“Recent improvements in the tone of U.S. economic data suggest to us that prospects are good for investors to see a continuation of the economic recovery that could drive earnings higher in the year ahead,” Stoltzfus wrote in a note.
The S&P 500 trades at 16.9 times reported operating profit, a 20 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Last week, the benchmark’s valuation reached the highest level since May 2010.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 2.2 percent today to 13.39. The measure is down 26 percent this year.
Six out of the 10 main S&P 500 industries declined as industrial and utility shares fell more than 0.6 percent for the worst performance.
Best Buy declined 11 percent to $38.78. Sales were little changed at $9.36 billion in the period ended Nov. 2, trailing the $9.37 billion analysts estimated on average.
Campbell Soup lost 6.2 percent to $39.20. The company said profit this year will be less than it previously estimated after a recall and changes in retailers’ buying patterns hurt first-quarter results.
Salesforce.com Inc. slipped 5 percent to $52.74. The biggest maker of customer-management software forecast fiscal fourth-quarter earnings of 6 cents a share at most. Analysts on average estimated 7 cents.
Home Depot gained 0.9 percent to $80.38. The one-and-a-half year gain in the U.S. housing market is giving consumers the confidence they need to remodel kitchens and bathrooms. The number of transactions in the quarter increased 4 percent to 344.3 million while the average purchase climbed 3.2 percent to $56.27, Home Depot said.
Tyson Foods added 4.6 percent to $30.78. The largest U.S. meat processor yesterday posted higher-than-expected quarterly revenue after a gain in prices and sales volumes for beef and chicken.
Boston Scientific Corp. climbed 3.4 percent to $11.96. The company’s Vercise deep brain stimulation system received CE Mark approval, as it met certain European product standards, for treatment of dystonia.
Tesla Motors Inc., the electric-car maker under an investigation by U.S. auto regulators, climbed 3.7 percent to $126.09, rebounding from a 10 percent decline yesterday. Craig Irwin, an analyst with Wedbush Securities Inc., said the probe was “entirely expected” and may be positive as it’s likely to lead to an independent confirmation of credibility of the company’s design.
The U.S. National Highway Traffic Safety Administration announced the probe today in a website posting following three fires in five weeks after roadway mishaps. The NHTSA said it would look into the fire risks from the cars’ undercarriages striking objects. The probe involves 13,108 Model S vehicles.
United Continental Holdings Inc. added 3.9 percent to $37.80. The world’s biggest airline said it will cut $2 billion in annual spending with half of the savings coming from lowering fuel expense.