S&P 500 Falls From Record as Fed Shows Inflation Concern

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U.S. stocks fell from all-time highs as Federal Reserve minutes showed some members said the central bank should remain attentive to the possibility prices in the economy aren’t rising fast enough.

Inflation has stagnated despite a strengthening of main labor-market indicators. Policy makers last month “pointed to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan,” in addition to a stronger dollar.

The Standard & Poor’s 500 Index fell 0.2 percent to 2,048.72 as of 4 p.m. in New York, on concern the inflation comments signal pessimism about the economy. The Dow Jones Industrial Average lost 2.1 points, or less than 0.1 percent, to 17,685.73. The Russell 2000 Index of smaller companies retreated 1.1 percent.

“The Fed is admitting they have no idea where inflation is going long term,” said Michael Block, chief equity strategist at Rhino Trading Partners LLC in New York. “While I admire their candor, this doesn’t make me want to own stocks this afternoon.”

Concern economic recoveries from the U.S. to Europe and Japan are failing to spur inflation has been cited by central bankers worldwide as justification for prolonged stimulus efforts. Today’s comments were in contrast from statements by Fed Chair Janet Yellen that the risks had ebbed of price increases holding below policy makers’ goal.

Remain Attentive

“Many participants observed the committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations,” according to a record of the Oct. 28-29 Federal Open Market Committee meeting released today in Washington. “Some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered.”

The S&P 500 and the Dow have rallied to records as better-than-forecast earnings and data boosted speculation that the economy is strong enough to overcome a global slowdown.

The benchmark index has rebounded 10 percent from a six-month low in October and is trading at 17 times the projected earnings of its members, the highest multiple since 2009. About 6.3 million shares changed hands Wednesday, 3.6 percent below the three-month average.

The Chicago Board Options Exchange Volatility Index, the gauge of options prices known as the VIX, added 0.7 percent to 13.96.

Phones, Retailers

Seven out of 10 main industries in the S&P 500 declined. Technology and phone shares dropped at least 0.6 percent for the biggest losses. Verizon Communications Inc. retreated 1.4 percent and Microsoft slipped 1.1 percent. Yahoo! Inc. lost 2.3 percent.

Retailers jumped 1.2 percent as a group amid corporate earnings reports.

Lowe’s Cos. climbed 6.4 percent to $62.26. The second-largest U.S. home-improvement chain forecast full-year earnings of about $2.68 a share, exceeding its previous prediction and the average analyst estimate of $2.63.

Target Corp. increased 7.4 percent to $72.50. The retailer posted third-quarter earnings that beat estimates after U.S. sales grew faster than expected and its money-losing expansion into Canada showed signs of improvement.

Staples added 9.1 percent to $13.92. The world’s largest office-supply chain said earnings will be as much as 32 cents a share in the fourth quarter, beating the 31 cent estimate by analysts.

“Once we get through Thanksgiving the focus will be on the consumer and retail sales,” KC Mathews, the Kansas City-based chief investment officer at UMB Bank, said by phone. “If you have a good holiday spending season it validates the health of the consumer and sets us up for some momentum in 2015.”

Jack in the Box Inc. jumped 4.8 to $74.92 percent after the operator of fast-food restaurants across the Western U.S. reported earnings that topped analysts’ estimates.

Cliff Natural Resources Inc. dropped 20 percent to $8.17. The company said it is examining exit options for its Eastern Canadian iron ore operations.

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