U.S. Stocks Close Little Changed as Energy Falls, Retailers Rise

  • Consumer prices in October show inflation closer to Fed goal
  • Retailers climb as Wal-Mart, Home Depot gain on earnings

U.S. stocks were little changed as a retreat in energy shares offset higher-than-forecast earnings from Home Depot Inc. and Wal-Mart Stores Inc., while firming inflation bolstered speculation the Federal Reserve will raise interest rates next month.

Crude oil renewed a selloff a day after the commodity’s climb ignited the strongest gains among energy companies in six weeks. Today’s reversal overshadowed a rally in retailers led by Home Depot after the group’s worst weekly drop in four years.

The Standard & Poor’s 500 Index slipped 0.1 percent to 2,050.44 at 4 p.m. in New York, after erasing an earlier gain of as much as 0.7 percent. The gauge’s advance stalled at its average price during the past 200 days. The Dow Jones Industrial Average added 6.49 points to 17,489.50. The Nasdaq Composite Index was little changed. About 7.6 billion shares traded hands on U.S. exchanges, in line with the three-month average.

"We’re coming off of a strong day yesterday,” said Alan Gayle, senior strategist for Atlanta-based RidgeWorth Investments, which oversees $40 billion. “The fact that the market is catching its breath and waffling around flat is an encouraging sign. There’s a never-ending swirl of geopolitical angst that tends to take center stage, but the big macro event that the market is focusing on is the December FOMC meeting.”

Data Watch

A report today showed the cost of living excluding food and fuel rose again in October after picking up the prior month, showing inflation edging closer toward the Fed’s goal. It was the strongest back-to-back readings since May and April.

Separate data showed factory output increased in October for the first time in three months as producers turned out more construction materials and motor vehicles. Total industrial production unexpectedly dropped for a second month as warm weather reduced electricity demand and the oil industry continued to cut back.

Traders are now pricing in a 64 percent probability that the Fed will raise rates next month. Minutes from the Fed’s October policy meeting will be released on Wednesday.

“There seems to be some data reassurance coming out,” said Ben Kumar, who helps oversee about $14 billion as an investment manager at Seven Investment Management in London. “In the U.S., you’ve seen sufficient data to suggest that interest rates are not going up prematurely, that the economy is strong enough to withstand a hike.”

The S&P 500 on Monday ended a three-day losing streak that capped declines in seven of eight sessions. The benchmark closed today 3.8 percent below its record set in May after coming within 1 percent of its high on Nov. 3.

With the earnings season drawing to an end, Staples Inc. and Gap Inc. are also among S&P 500 companies reporting results this week. Of those that have done so already, about 74 percent beat profit projections and 43 percent beat sales estimates. Analysts now project profits for index members dropped 3.7 percent in the third quarter, improved from calls for a 7.2 percent decline at the start of the season.

The Chicago Board Options Exchange Volatility Index rose 3.7 percent Tuesday to 18.84. The measure of market turbulence known as the VIX yesterday fell the most in more than three weeks after coming off its biggest weekly increase since August.

Energy Slides

Seven of the S&P 500’s main industries declined today, with utilities and energy shares dropping the most. Health-care, consumer discretionary and phone companies advanced. A group of retailers in the index climbed 1 percent, after losing 6.6 percent last week.

Energy companies sank 1.2 percent, reversing a portion of Monday’s 3.3 percent rally, as oil dropped in anticipation of government data forecast to show crude stockpiles expanded for an eighth week. Cabot Oil & Gas Corp. fell 6.9 percent. Chesapeake Energy Corp., Southwestern Energy Co. and Range Resources Corp. slid more than 4.6 percent.

Dick’s Sporting Goods Inc. lost 9.4 percent, the most in 18 months after its earnings fell short of estimates and it cut its outlook. The retailer’s results helped drag supplier Under Armour Inc. down 5.6 percent to a four-month low.

Urban Outfitters Inc. fell 3.8 percent, trimming an earlier 15 percent tumble, after reporting quarterly revenue and same-store sales that missed analysts’ forecasts. The shares have dropped 24 percent during a five-day slide.

Among the session’s worst performers, Keurig Green Mountain Inc. retreated 9.8 percent to its lowest in more than two years ahead of its quarterly earnings report Wednesday. The coffee K-cup maker is likely to report steep sales declines in the September quarter, Susquehanna International Group LLP analyst Pablo Zuanic wrote in a note yesterday.

Retailers Gain

Home Depot and Wal-Mart added at least 3.5 percent, with both extending a two-day climb to at least 5.1 percent. Wal-Mart had its best single day gain in two months, while Home Depot closed at a record.

TJX Companies Inc. was also among the retailers benefiting from strong quarterly earnings. The owner of the T.J. Maxx discount retail chain gained 3.9 percent, the most in three months, after boosting its year view and reporting sales that beat the average of analyst estimates.

Netflix Inc. rose 5.2 percent, taking its two-day gain to 13 percent after a regulatory filing Monday showed billionaire investor George Soros’ investment firm added a stake of more than 300,000 shares during the third quarter. The shares closed at a two-month high.

The Nasdaq Biotechnology Index rallied 1.4 percent, its best performance in two weeks as biotechs helped lift the broader health-care group. Amgen Inc. and Regeneron Pharmaceuticals Inc. increased at least 2 percent. Dan Loeb, the founder of hedge fund firm Third Point, is suggesting that Allergan Plc and Amgen consider a merger, according to three people with knowledge of the matter.

Airgas Inc. soared 29 percent to an all-time high. Air Liquide SA will acquire the company for about $13.4 billion including debt to form the world’s biggest supplier of industrial gases. The surge in Airgas wasn’t enough to keep the raw-materials group from slipping, as Freeport-McMoRan Inc. and Newmont Mining Corp. sank more than 4.2 percent.

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