S&P 500 Falls Most Since November as Minutes Show DebateNikolaj Gammeltoft and Sarah Pringle
U.S. stocks fell from five-year highs, giving the Standard & Poor’s 500 Index its biggest decline since November, as minutes from the Federal Reserve’s last meeting showed a debate over further stimulus action.
Apple Inc. fell 2.4 percent after Foxconn Technology Group, the biggest assembler of Apple products, froze hiring across China. Toll Brothers Inc., the largest U.S. luxury-home builder, lost 9.1 percent as it reported earnings that missed estimates. Caterpillar Inc. slid 2.5 percent after saying global retail machine sales dropped. OfficeMax Inc. dropped 7 percent after agreeing to be bought by Office Depot Inc. for $1.17 billion.
The Standard & Poor’s 500 Index slipped 1.2 percent to 1,511.95 at 4 p.m. in New York. The Dow Jones Industrial Average declined 108.13 points, or 0.8 percent, to 13,927.54. About 7.5 billion shares traded hands on U.S. exchanges today, or 22 percent above the three-month average. The VIX, the benchmark gauge of U.S. equity options, jumped the most in 15 months on growing demand for protection from losses.
“It doesn’t take a lot of imagination to think about where the next potential source of weakness or worry is going to be, and that’s going to be when the Fed steps back from their quantitative easing program,” Brian Barish, president of Denver, Colorado-based Cambiar Investors, which manages about $7 billion, said in a phone interview.
Minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released today showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9 percent unemployment.
Some said an earlier end to purchases might be needed, and others warned against a premature withdrawal of stimulus. Several policy makers said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases.
Equities retreated after yesterday’s 0.7 percent rally in the S&P 500 pushed the benchmark gauge’s price-to-earnings ratio to 15.1, the highest level since July 2011, data compiled by Bloomberg show.
The S&P 500 has gained 6 percent this year, touching the highest level since October 2007, as U.S. lawmakers agreed on a compromise budget and companies reported better-than-estimated earnings. The benchmark gauge is 3.4 percent below its 2007 all-time high of 1,565.15, while the Dow is 1.7 percent from its record high of 14,164.53.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 19 percent to 14.68 today, the most since November 2011. The VIX has retreated 19 percent this year.
About 71 percent of the 413 companies in the S&P 500 that have released quarterly results since Jan. 8 have exceeded profit estimates, and 66 percent beat sales estimates, data compiled by Bloomberg show. Devon Energy Corp. and Ameren Corp. were among companies reporting today.
Stocks extended losses and the S&P GSCI Spot Index tumbled 1.1 percent today on speculation that a commodity fund is liquidating. Raw-material shares had the biggest decline among 10 groups in the S&P 500, sliding 2.8 percent, the most since October.
Freeport-McMoRan Copper & Gold Inc. fell 6 percent to $32.22, while Cliffs Natural Resources Inc. slid 4.9 percent to $27.29.
CF Industries Holdings Inc. stumbled 5.2 percent to $207.07. The largest U.S. maker of nitrogen fertilizer reported fourth-quarter sales declined to $1.48 billion from $1.72 billion a year earlier, less than the $1.58 billion average of 13 estimates.
Apple declined $11.14 to $448.85. Foxconn halted recruitment until the end of March after more employees returned from the Chinese New Year break than a year earlier, Bruce Liu, a spokesman for the Taipei-based company, said today in a phone interview. The decision wasn’t related to iPhone 5 production, he said.
An S&P gauge of homebuilders lost 6.7 percent, the most since June, as all 11 stocks retreated. Work began on 613,000 one-family houses at an annual rate last month, the most since July 2008 and up 0.8 percent from December’s 608,000, Commerce Department figures showed today. Total housing starts dropped to a 890,000 rate, less than forecast and restrained by a slump in construction of multifamily units.
Toll Brothers dropped $3.34 to $33.56, the most since December 2008. The Horsham, Pennsylvania-based company reported fiscal first-quarter earnings that missed analyst estimates as the average selling price of its homes fell.
Caterpillar slid $2.38 to $93.22. The biggest maker of construction and mining said global retail machine sales dropped 4 percent in the three months through January. The company last month reported the first decline in retail machine sales in more than 2 1/2 years.
Joy Global Inc. rallied 2.7 percent to $65.25 as the world’s biggest producer of underground mining machines may seek acquisitions. While Joy is focused on integrating past deals, the company may seek purchases after accumulating more cash, Chief Executive Officer Michael Sutherlin said at a Barclays Plc investor conference today.
Office Depot dropped 17 percent to $4.18 and OfficeMax slipped 91 cents to $12.09, reversing earlier gains. Both stocks rallied yesterday in anticipation of the acquisition.
The deal will combine companies with revenue totaling about $18 billion compared with more than $24 billion in sales last year for Staples Inc. The company may accelerate the closing or selling of hundreds of stores after Starboard Value LP, an activist fund that became Office Depot’s largest shareholder in September, pushed for expense reductions.
Garmin Ltd. tumbled 9.4 percent to $35.54 for the biggest retreat in the S&P 500. The biggest maker of navigation devices declined the most in more than three years after forecasting 2013 sales and profit that missed estimates, as consumers switch to smartphones for maps and directions. The Schaffhausen, Switzerland-based company also posted fourth-quarter per share profit of 68 cents, missing the average analyst estimate of 73 cents.
NetSpend Holdings Inc. surged 29 percent to $15.81 after Total System Services Inc. agreed to buy the provider of prepaid debit cards for about $1.4 billion in cash.
Allscripts Healthcare Solutions Inc. advanced 14 percent to $12.72 after saying fourth-quarter bookings, which represent future sales, increased 12 percent to $181 million from the previous quarter.