U.S. Stocks Retreat After S&P 500 Rallies for Six Weeks

U.S. stocks fell after a six-week rally left the Standard & Poor’s 500 Index at its most expensive valuation since July 2011.

BlackBerry shares slid 4.6 percent while Apple Inc. rose 1 percent, after Home Depot Inc. said it will exchange 10,000 BlackBerry models with iPhones. Google Inc. declined 0.4 percent as Chairman Eric Schmidt adopted a plan to sell as many as 3.2 million shares in the operator of the world’s most popular search engine. AOL Inc. jumped 7.4 percent after an analyst recommended investors buy the shares.

The S&P 500 fell 0.1 percent to 1,517.01. The equity benchmark last week reached its highest level since November 2007, completing its longest streak of weekly gains since August. The Dow Jones Industrial Average lost 21.73 points, or 0.2 percent, to 13,971.24 today. About 4.9 billion shares traded hands on U.S. exchanges today, 20 percent lower than the three-month average.

“We’re extremely overbought, but that doesn’t mean the market can’t continue higher,” T. Doug Dale, chief investment officer at Jackson, Mississippi-based Security Ballew Inc. Wealth Management, which oversees $500 million in assets, said in a telephone interview. “But investors must be wary of air pockets, as in major downturns that can happen quickly.”

‘Stocks Pause’

The S&P 500 has rallied 6.4 percent so far in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The index is trading at 15 times reported earnings, up from a low of 13 in 2012 and compared with the six-decade average of 16.4, data compiled by Bloomberg show.

The gauge is about 3.1 percent below its record high reached in October 2007. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

“With the strong start this year, it’d be very understandable if stocks pause here,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said by phone. His firm manages $759 billion. “The focus is going to be what the private sector can do to generate growth. The market understands that the public sector is not going to deliver any big presents.”

Finance Ministers from the 17-member euro area were scheduled to meet today in Brussels to discuss aid to Cyprus and Greece as concern over the region’s sovereign-debt crisis revives. Group of 20 finance chiefs and central bankers will gather in Moscow on Friday.

Obama Speech

In the U.S., President Barack Obama will present his legislative priorities for the year in his annual State of the Union address to a joint session of Congress on Tuesday night. The speech is his first State of the Union after being elected to a second term and he is likely to focus on gun control, immigration law and avoiding automatic spending cuts.

Senate Democrats are close to proposing a $120 billion plan for a 10-month delay in the cuts set to begin March 1, according to a Senate Democratic aide. The aide, who asked not to be identified in discussing the proposal, said half of the cost of delaying the across-the-board cuts would be covered by revenue increases and the other half by spending reductions.

Goldman Sachs Group Inc. cut its three-month recommendation on global equities to neutral from overweight, saying investors “will need time to digest the recent gains.”

“The potential for a strong rally from here is likely to be limited in the near term as U.S. equities are trading slightly above our estimates of current fair value,” Goldman Sachs analysts led by Anders Nielsen and Peter Oppenheimer wrote in a client note dated Feb. 8.

Industry Returns

Seven out of the 10 S&P 500 groups retreated as energy and consumer-discretionary companies fell the most, erasing at least 0.3 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, climbed 0.6 percent to 12.94.

BlackBerry dropped 76 cents to $15.73, while Apple shares rose $4.95 to $479.93. Home Depot said it will swap out the Canadian company’s phones to its corporate employees and managers with iPhones. The move deals a setback to BlackBerry, formerly known as Research In Motion Ltd., which unveiled a new lineup last month in a comeback attempt after years of losing ground to the iPhone and Android devices.

Green Mountain Coffee Roasters Inc. slipped 4.5 percent to $43.12. The maker of Keurig brewers and single-serve pods was cut to neutral from buy at Dougherty & Co.

Google retreated $2.95 to $782.42. Schmidt’s planned share sales, worth about $2.5 billion, represent 42 percent of his stake in the company. The sales may take place over a maximum period of a year, California-based Google said.

Financial Shares

Financial shares were the biggest gainers among 10 S&P 500 groups, adding 0.4 percent. Citigroup Inc. increased 1.1 percent to $43.15 and Wells Fargo & Co. advanced 1.1 percent to $35.26.

McGraw-Hill Cos. rose 3.8 percent to $44.28. The shares tumbled 27 percent last week after the U.S. Justice Department sued the company’s S&P unit, accusing it of defrauding investors by assigning inflated credit ratings to mortgage-backed securities and collateralized debt obligations. Moody’s Corp. jumped 4.9 percent to $45.49 today, after dropping 22 percent last week.

Nasdaq OMX Group Inc. climbed 3.1 percent to $30.38. The second-largest U.S. stock-exchange operator held talks about going private with Carlyle Group LP before discussions broke down over price, according to a person with direct knowledge of the matter. Rob Madden, a spokesman for Nasdaq OMX, declined to comment, saying the company doesn’t speak about “rumors or speculation.” Carlyle’s spokesman Randy Whitestone did not immediately return a call or email seeking comment.

More Room

Financial stocks have more room to advance even after a 26 percent rally last year, according to chief U.S. equity strategists from Deutsche Bank AG and JPMorgan Chase & Co.

Bank stocks offer “huge plays” on the housing recovery, Thomas Lee, New York-based chief U.S. equity strategist at JPMorgan, said in a television interview on “Bloomberg Surveillance” with Tom Keene. His counterpart at Deutsche Bank, David Bianco, said on the same program that he’s bullish on financial, industrial and technology companies.

“It’s a group that’s still viewed as tainted,” Lee said of the financial sector. “There’s investors that are still worried about regulations, you know, visibility.”

AOL gained $2.51 to $36.23. The Web publisher that owns the Huffington Post and TechCrunch was raised by RBC Capital Markets LLC to outperform, the equivalent of buy, from sector perform.

Solar stocks rallied as Germany’s Wacker Chemie AG, the fourth-biggest maker of polysilicon, said it will increase production to meet demand from solar-power developers.

First Solar Inc., the world’s largest thin-film solar manufacturer, climbed 6.5 percent to $32.36 for the biggest advance in the S&P 500. SunPower Corp. jumped 19 percent to $9.44 while Yingli Green Energy Holding Co. gained 5.5 percent to $3.26.

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