U.S. stocks closed little changed, with the Standard & Poor’s 500 Index slipping from a record, after data showing housing starts surged to a seven-year high bolstered speculation the Federal Reserve may raise interest rates this year.
Wal-Mart Stores Inc. slumped 4.4 percent after quarterly results missed estimates, while Urban Outfitters Inc. tumbled 15 percent after profit and sales were short of analysts’ projections. Energy shares slid with oil prices. Yahoo! Inc. fell 7.6 percent, leading technology shares lower. Take-Two Interactive Software Inc. jumped 18 percent after its results beat forecasts.
The S&P 500 Index declined 0.1 percent to 2,127.83 at 4 p.m. in New York, snapping a three-session string of all-time highs. The Dow Jones Industrial Average rose 13.51 points, or 0.1 percent, to 18,312.39, a record for a second day. The Nasdaq Composite Index lost 0.2 percent. About 6.2 billion shares changed hands on U.S. exchanges, 4 percent below the three-month average.
“When we get stronger news, we get concern about rising interest rates,” said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania. “We’re back to the guessing game of what happens with rates and whether economic data will be strong enough for the Fed to act.”
A report today showed new residential construction surged in April to the highest level since November 2007, while more permits, a proxy for future construction, were issued than at any time since June 2008.
An improving labor market and mortgage costs close to multi-year lows are reviving residential construction, a sign that the weakness in early 2015 was probably due to harsh winter weather.
That supports the Federal Reserve’s view that a slowdown in first-quarter economic growth was likely temporary, as policy makers debate the timing of raising interest rates. Minutes from the Federal Reserve’s April meeting will be released tomorrow.
U.S. equities rose to all-time highs Monday, helped by merger activity, an advance in Apple Inc. and higher bond yields that sent banks rallying.
“You saw that housing starts report, which was nice and solid,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. “It’s nice to see U.S. economic data beating, given how bad of a run we’ve seen with macro data. I thought that would be enough of a kick to keep us going in the follow-through, but crude oil is down a little bit which is curbing risk-taking a little.”
The Chicago Board Options Exchange Volatility Index rose 0.9 percent to 12.85, after a 2.8 percent gain on Monday. The gauge, know as the VIX, fell 3.7 percent last week for its first weekly decline in three weeks.
Seven of the S&P 500’s 10 main groups declined Tuesday, led by energy. Financial shares in the benchmark index advanced for a second day to a 2015 high, as Treasury yields extended their climb after stronger-than-forecast housing data. Wells Fargo & Co., BB&T Corp. and Huntington Bancshares Inc. added at least 1.1 percent. Wells Fargo reached an all-time high, while Huntington hit its highest level since Sept. 2008.
An S&P gauge of homebuilders rose 0.9 percent to the highest since April after the better-than-forecast housing starts. The index rose for a fourth day, its longest streak since January. KB Home jumped 2.4 percent, while Ryland Group Inc. and D.R. Horton Inc. added at least 1.1 percent.
With signs of better economic growth in the housing data and a drop in oil prices, companies that stand to benefit from healthier consumer spending got a lift. McDonald’s Corp. climbed 2.7 percent to a 10-month high. Royal Caribbean Cruises Ltd. rose 1.8 percent, bringing its May gain to 13 percent, the best month since July 2013. Olive Garden chain owner Darden Restaurants Inc. advanced 1.7 percent.
Merck & Co. added 0.9 percent amid an advance in health-care shares, which also rose for a fourth day. Pfizer Inc. climbed 0.7 percent. Endo International Plc rebounded 2.8 percent after losing 5.4 percent Monday on its Par Pharmaceutical Holdings Inc. buyout. Hospital operators HCA Holdings Inc. and Tenet Healthcare Corp. increased more than 1.7 percent, with HCA posting a third straight record close.
Energy companies in the S&P 500 dropped 1.2 percent to a one-month low, as crude oil declined 3.7 percent. Chevron Corp. lost 1.5 percent, while Diamond Offshore Drilling Inc. and Transocean Ltd. retreated more than 4.9 percent.
Raw-material shares fell for a second day as the dollar’s best two-day gain since De. 2011 reduces the appeal of commodities priced in the U.S. currency. Freeport-McMoRan Inc. lost 3.8 percent, after falling 3.1 percent Monday, while steelmaker Nucor Corp. slipped 2.2 percent.
Technology shares slid, led by a slump in Yahoo. The stock lost 7.6 percent on reports that the U.S. Internal Revenue Service is considering a rule change that might complicate efforts to exit a stake in Alibaba Group Holding Ltd. Alibaba rose 1.3 percent.
Take-Two Interactive soared 18 percent, the most since Feb. 2008, as the video game maker’s quarterly results benefited from sales of the latest edition of Grand Theft Auto as well as Evolve, a shooter game released Feb. 10.
TJX Companies Inc. jumped 2.9 percent, its biggest gain since February. The off-price apparel and home fashion retailer boosted its full-year profit and sales growth forecasts.
Wal-Mart dropped 4.4 percent, the most in three years, to a six-month low after first-quarter U.S. sales grew more slowly than projected and currency fluctuations ate into profit.
Urban Outfitters tumbled 15 percent, the most since January 2012, to a four-month low after the apparel retailer’s first-quarter profit and sales missed analysts’ forecasts.
MBIA Inc. sank 8.4 percent, the biggest decline in more than two years. Warburg Pincus LLC, the largest holder of MBIA’s stock, said it will reduce its stake by more than half.