U.S. Stocks Fluctuate as Investors Weigh Stimulus Timing

U.S. stocks declined, after the Standard & Poor’s 500 Index climbed four straight weeks, as investors weighed the pace of central bank stimulus efforts amid corporate dealmaking.

Procter & Gamble Co. and Coca-Cola Co. retreated at least

1.2 percent as companies that make food, beverages and household products slumped. Yahoo! Inc. climbed 0.2 percent after agreeing to buy blogging network Tumblr Inc. for $1.1 billion. Actavis Inc. rallied 1.3 percent as it reached a deal to acquire Warner Chilcott Plc. Exxon Mobil Corp. and Chevron Corp. gained more than 0.8 percent as energy shares surged.

The S&P 500 retreated 0.1 percent to 1,666.29 in New York after rising as much as 0.3 percent earlier. The Dow Jones Industrial Average declined 19.12 points, or 0.1 percent, to 15,335.28. About 6 billion shares traded hands today, or 5.1 percent below the three-month average.

“Some minor pullback should be expected after the steady gains we’ve achieved,” Eric Teal, chief investment officer at First Citizens BancShares Inc., which manages $5 billion in Raleigh, North Carolina, said in a phone interview. “I don’t think that we’re going to see any immediate tapering off of monetary policy, though we can expect from hawkish members or others outside the FOMC questioning the policy, which might lead to market volatility.”

The S&P 500 added 2.1 percent last week, its fourth straight weekly gain, as gauges of leading economic indicators and consumer sentiment beat estimates. The U.S. bull market has entered its fifth year, adding about $11.5 trillion in market value, according to data compiled by Bloomberg. The S&P 500 has surged 146 percent from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Federal Reserve.

‘Escape Velocity’

Stocks erased gains from earlier in the session after Fed Bank of Chicago President Charles Evans said the U.S. economy has improved “quite a lot” as the central bank maintains record stimulus. The question now is “how much confidence we have that the improvements that have been made will continue and be sustained,” said Evans, who holds a vote on the Federal Open Market Committee this year.

Dallas Fed President Richard Fisher said in an interview on CNBC that the odds favor dialing back the central bank’s purchase of $85 billion in bonds per month. He said he would have started tapering stimulus at the last FOMC meeting.

Unprecedented Stimulus

Some Fed officials in recent months have signaled they favor scaling back the quantitative-easing program in the next few months. Fed Chairman Ben Bernanke has said he would continue unprecedented stimulus until the jobless rate falls to 6.5 percent or inflation rises above 2.5 percent. The Fed publishes minutes of its last policy meeting on May 22, while Bernanke will testify that day on the economic outlook.

“Keep in mind we are at all-time highs so even a moderate cautious comment will be met with some selling,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets LLC in Boston, wrote in an e-mail. “Investors are looking for a reason to take profits.”

The S&P 500 has rallied 127 days without a retreat exceeding 5 percent or more, data compiled by Bloomberg show. The index dropped 7.7 percent from a Sept. 14 peak through Nov.

15. The advance is the longest without a 5 percent drop since a 173-day stretch ended Feb. 20, 2007, about eight months before the financial crisis sent the market plunging 57 percent.

Defying Skeptics

“This move in the market has defied all the skeptics,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a phone interview. His firm manages about $117 billion. “While all of us know there will be some pullback at some point, it’s hard to be the person to bet that tomorrow will be the case.”

The Chicago Board Options Exchange Volatility Index, or VIX, rose 4.6 percent to 13.02 The equity volatility gauge, which moves in the opposite direction to the S&P 500 about 80 percent of the time, has slipped 28 percent this year.

The S&P 500 Consumer Staples Index retreated the most among 10 industry gauges, falling 1 percent as Procter & Gamble slid

1.2 percent to $79.09 and Coca-Cola fell 1.4 percent to $42.38.

Red Hat Inc. slipped 4.3 percent to $52.65, ending 12 days of consecutive gains. The largest seller of Linux operating-system software was cut to market perform, an equivalent of neutral, from outperform at BMO Capital Markets by equity analyst Karl Keirstead.

Energy Rally

Five of the 10 S&P 500 industry groups gained, led by a 1.3 percent rally among energy producers.

Exxon Mobil rose 0.8 percent to $92.52 and Chevron added

1.1 percent to $124.78. Oil prices advanced for a fourth day as the dollar declined and turmoil in the Middle East bolstered concern that shipments from the region will be disrupted.

WPX Energy Inc. climbed 7 percent to $19.76. Taconic Capital Advisors LP disclosed a 6.39 percent stake in the natural gas and oil company and said it may seek ways to enhance shareholder value, according to a regulatory filing.

Chesapeake Energy Corp. added 2.6 percent to $20.80. The second-biggest U.S. natural-gas producer said Robert Douglas Lawler will become chief executive officer from June 17. Lawler was senior vice president of international and deepwater operations at Anadarko Petroleum Corp., Chesapeake said.

Co-founder Aubrey McClendon, 53, stepped down as CEO of Chesapeake last month after a shareholder revolt by Carl Icahn and Southeastern Asset Management Inc.

Apple Inc. increased 2.2 percent to $442.93, climbing above its average price during the past 50 days.

Takeover Deals

About $10.2 billion of takeovers was announced today, bringing the total value of transactions so far this year to $330.2 billion, according to data compiled by Bloomberg.

Yahoo rose 0.2 percent to $26.58. The biggest U.S. Web portal is buying Tumblr as Chief Executive Officer Marissa Mayer seeks to lure users and advertisers with her priciest acquisition to date. Mayer, CEO since July, is betting that Tumblr will help transform Yahoo into a hip destination in the era of social networking as she challenges Google Inc. and Facebook Inc. in the $17.7 billion display ad market.

Actavis added 1.3 percent to $127.15 after saying it will buy Warner Chilcott for $8.5 billion in a stock transaction that enables the company to expand in women’s health and urology. The combined annual revenue of the companies will be about $11 billion, according to a joint statement. Warner Chilcott, the drugmaker that unsuccessfully pursued a sale last year, increased 2 percent to $19.60.

Websense Jumps

Websense Inc. jumped 29 percent to $24.76. The Internet-security company will be acquired by private-equity firm Vista Equity Partners in a deal valued at about $906 million. Websense is trying to transition from its roots blocking inappropriate websites in the workplace into a provider of broader online-security services.

Abbott Laboratories gained 3.3 percent to a record $37.81. The medical device and nutritional products maker was boosted to buy from neutral by Goldman Sachs Group Inc. The company has the potential to expand margins, analyst David Roman wrote in a note.

Pandora Media Inc. gained 2 percent to $16.38 as Barclays Plc raised its recommendation on the biggest Internet radio provider to equal weight, similar to hold, from underweight

Before it's here, it's on the Bloomberg Terminal.