U.S. Stocks Retreat on China Data, Stimulus Speculation

U.S. stocks retreated, giving benchmark indexes their first back-to-back drops in one month, as a contraction in China manufacturing offset American housing data and investors weighed Federal Reserve stimulus comments.

Sempra Energy and Ralph Lauren Corp. slipped at least 2.3 percent after their forecasts missed analysts’ estimates. Ford Motor Co. retreated 1.1 percent after saying it will stop making cars in Australia in October 2016. Hewlett-Packard Co. surged 17 percent after the computer maker’s forecast for fiscal third-quarter profit exceeded estimates.

The S&P 500 fell 0.3 percent to 1,650.51 in New York, after tumbling as much as 1.2 percent earlier in the day. The Dow Jones Industrial Average lost 12.67 points, or 0.1 percent, to 15,294.50. About 7.3 billion shares traded hands on U.S. exchanges today, or 15 percent above the three-month average.

“The market is struggling with conflicting language from Fed officials as to the timing of potential tapering of asset purchases, slowing growth in China and after Japan’s decline in equities,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. “We’re seeing modest profit taking in the U.S. as a result.”

Stocks fell yesterday after Fed Chairman Ben S. Bernanke said that the flow of asset purchases could be reduced “in the next few meetings” if economic conditions improve. Fed Bank of St. Louis President James Bullard said in London today he’s concerned about inflation and that he’d like to continue the current pace of bond purchases to stimulate the economy.

China Slowdown

In China, the preliminary reading for a Purchasing Managers’ Index of manufacturing was 49.6 in May, according to data released by HSBC Holdings Plc and Markit Economics. That missed the average forecast of economists calling for a reading of 50.4 and compared with a final 50.4 for April. Results below 50 signal contraction.

Global stocks slumped as rising bond yields pushed Japan’s Topix index down 6.9 percent, the most since the aftermath of the March 2011 tsunami and nuclear disaster. The Stoxx Europe 600 Index fell 2.1 percent.

U.S. equities pared declines after data showed builders sold more U.S. new homes than projected in April. A separate report showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign that the job market is sustaining recent gains.

The swing in stocks “really shows the nervousness in the marketplace that at any time a piece of exogenous news can quickly change the psychology of the marketplace,” Rick Bensignor, head of trading strategy at Wells Fargo Securities LLC in New York, said in a phone interview. “But you’ll have your confirmed bulls that will use any pullbacks, at all, to buy. There is enough of the street that thinks that the S&P 500 has a few more hundred points to go.”

Bull Market

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 144 percent from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Fed. The gauge closed at a record on May 21.

The Chicago Board Options Exchange Volatility Index, or VIX, rose 1.8 percent to 14.07. The equity volatility gauge, which moves in the opposite direction to the S&P 500 about 80 percent of the time, has risen 13 percent over four days, the longest streak since Jan. 28.

Nine out of the 10 S&P 500 industry groups declined as utility, financial and consumer-staples companies slumped more than 0.4 percent.

Utility Slump

Sempra Energy declined 2.7 percent to $79.47. The San Diego-based power producer projected 2014 earnings that were lower than expectations. Utility companies in the S&P 500 have dropped 2.4 percent as a group in the past two days.

Ralph Lauren slid 2.3 percent to $183.69. The retailer of its namesake brand clothing forecast sales in the current fiscal year to rise 4 percent to 7 percent. That trailed the average 10 percent growth estimated by analysts in a Bloomberg survey.

Ford dropped 1.1 percent to $14.81 after saying it will leave Australia as a surge in the currency undermines the local industry’s ability to compete with imports. The closure will cut 1,200 jobs, according to a statement. Ford began assembling Model Ts in Australia in 1925.

Hewlett-Packard jumped 17 percent to $24.86 for its biggest increase since 2001. The largest maker of personal computers said earnings excluding some items will be in the range of 84 cents to 87 cents a share in the three months through July. Analysts on average project 83 cents.

Homebuilders Gain

An S&P index of homebuilders added 1 percent as 10 out of its 11 members gained. KB Home climbed 1.6 percent to $23.40 and Toll Brothers Inc. advanced 1.4 percent to $37.60.

Dollar Tree Inc. added 3.8 percent to $50.19. The discount-store chain lifted its forecast for annual earnings to as much as much $2.77 a share, compared with an earlier prediction of no more than $2.74. First-quarter earnings also topped analysts’ estimates.

Domino’s Pizza Inc. increased 4.6 percent to $59.21. The company will join the S&P MidCap 400 Index after the close on May 30, replacing Plains Exploration & Production Co., according to a statement by S&P Dow Jones Indices yesterday.

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