U.S. stocks had their biggest weekly drop since August, dragging the Standard & Poor’s 500 Index down from a record high, amid concern that improving economic data will prompt the Federal Reserve to cut stimulus.
Health-care, telephone and utility companies led the retreat in all 10 of the main S&P 500 industries as investors shunned companies whose earnings tend to benefit the least from an accelerating economy. McDonald’s Corp. lost 2.4 percent as November sales missed analysts’ estimates. Cisco Systems Inc. sank 4.9 percent after reducing its revenue forecast. Facebook Inc. jumped 11 percent after the social-media company was picked to join the S&P 500.
The S&P 500 tumbled 1.6 percent to 1,775.32 for the week after closing at an all-time high of 1,808.37 on Dec. 9. The benchmark gauge is up more than 24 percent in 2013, poised for its best yearly gain in a decade. The Dow Jones Industrial Average slipped 264.84 points, or 1.7 percent, to 15,755.36. Both gauges capped their biggest weekly losses since August.
“There are jitters around Fed tapering and that’s causing people to take some money off the table,” Joseph Quinlan, the chief market strategist at U.S. Trust, a wealth management unit of Bank of America Corp., said in a phone interview from New York. His firm oversees $333 billion in client assets. “It’s been a very good year.”
Stocks extended declines for a second week after economic data showed retail sales rose more than forecast last month and job openings in the U.S. climbed to a five-year high in October. Fed officials have scrutinized economic data and watched Washington’s budget negotiations to determine whether the recovery is robust enough to slow their bond-buying program.
The House of Representatives on Dec. 12 passed a budget that limits automatic spending cuts and avoids another government shutdown. The deal protects entitlement programs favored by the Democrats and corporate tax breaks that Republicans have demanded. The Senate needs to approve the legislation and President Barack Obama has to sign it.
The Fed will probably start reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll. Three rounds of monetary stimulus, also known as quantitative easing, from the central bank have helped propel the S&P 500 to a 162 percent rally from a 12-year low in 2009.
The Chicago Board Options Exchange Volatility Index surged 14 percent to 15.76 over the week. The gauge of S&P 500 options known as the VIX has jumped 29 percent from a November low.
Health-care, telephone and utility stocks dropped more than 2.4 percent. Pfizer Inc., the world’s biggest drugmaker, slumped 4.1 percent to $30.25.
McDonald’s fell 2.4 percent to $94.44. The world’s largest restaurant chain said global sales at stores open at least 13 months rose 0.5 percent last month, trailing analysts’ estimates as rivals lured diners amid a choppy U.S. economic recovery. Analysts projected a 0.6 percent increase, the average of estimates from Consensus Metrix.
Cisco sank 4.9 percent to $20.24 for the biggest loss in the Dow. The biggest maker of computer-networking equipment reduced its revenue forecast for the next three to five years amid weaker demand from emerging markets and telecommunications-service providers.
Anadarko Petroleum Corp. dropped 9.6 percent to $78.30. The energy producer and its Kerr-McGee unit acted improperly in the 2005 spinoff of Tronox Inc. and may have to pay as much as $14 billion related to environmental cleanup and health claims, a judge ruled. Anadarko said it expects to appeal the ruling.
Laboratory Corp. of America Holdings slumped 11 percent to $89.13. The provider of more than 4,000 clinical tests provided 2014 forecasts that disappointed investors and said there is “uncertainty” related to the implementation of the Patient Protection and Affordable Care Act.
Facebook rallied 11 percent to $53.32. The company will replace Teradyne Inc. in the S&P 500 at the close of trading on Dec. 20, S&P Dow Jones Indices said. The company will also join the S&P 100 Index in place of Williams Cos.
The addition to the benchmark indexes cements the social-networking company’s recovery from the turbulence that surrounded its initial public offering last year. The stock lost more than half its value in the months after its May 2012 IPO as investors questioned its growth prospects. The shares have doubled this year after the company built out its advertising business and mobile promotions.
Adobe Systems Inc. rose 9.5 percent, the most in the S&P 500, to a record $60.89. The largest maker of graphic-design software said it signed up online customers at a faster-than-projected clip, adding to evidence the company is reducing its dependence on the slumping personal-computer market.
Scripps Networks Interactive Inc. advanced 9.1 percent to $80.73 amid speculation that the owner of HGTV and the Food Network is a takeover target.