U.S. Stocks Fall as Investors Weigh Stimulus Cuts TimingWhitney Kisling and Nikolaj Gammeltoft
U.S. stocks fell, snapping a streak of 20 straight Tuesday gains for the Dow Jones Industrial Average, as economists predicted the Federal Reserve may reduce stimulus as soon as September.
Exxon Mobil Corp. and Chevron Corp. dropped 0.9 percent as energy producers slumped. Salesforce.com Inc. declined 7.9 percent after saying it will buy ExactTarget Inc. Dollar General Corp. fell 9.2 percent after reducing the top end of its full-year earnings forecast. General Motors Co. added 1.6 percent as S&P said the automaker will replace H.J. Heinz Co. in the benchmark equity gauge.
The Standard & Poor’s 500 fell 0.6 percent to 1,631.38 at 4 p.m. in New York, erasing an earlier gain of as much as 0.4 percent. The Dow slid 76.49 points, or 0.5 percent, to 15,177.54. More than 6.8 billion shares traded hands on U.S. exchanges today, 7.6 percent higher than the three-month average.
“We definitely think that equities are going to be more volatile with all the talk of Fed tapering,” David Lafferty, a Boston-based investment strategist at Natixis Global Asset Management, which manages about $785 billion, said in a phone interview. “You can see that volatility in the market jitteriness in the past days.”
The S&P 500 has alternated between gains and losses for the past seven sessions as Fed policy makers continue to debate when to begin reducing monetary stimulus.
Fed Bank of Kansas City President Esther George, who has dissented against record stimulus at every policy meeting this year, urged the central bank in a speech today to slow bond buying. San Francisco Fed President John Williams said yesterday a “modest adjustment downward” in the purchases is possible as “early as this summer.” Atlanta Fed President Dennis Lockhart said “very mixed” economic data makes him “more cautious” about a near-term reduction.
Economists at Goldman Sachs Group Inc. and Deutsche Bank AG predicted the central bank could start winding down its bond-buying program this summer. The Fed could cut $25 billion in purchases in September, even if this week’s employment data falls short of forecasts, Joseph A. LaVorgna, chief economist at Deutsche Bank Securities in New York, wrote in a note.
While Goldman Sachs’s forecast remains for Fed officials to wait until December before slowing their $85 billion of monthly asset purchases, the firm’s chief economist, Jan Hatzius, said that so-called tapering could occur sooner.
“A September tapering is certainly possible, I think that is going to depend on the data,” Hatzius said in a Bloomberg Television interview at Goldman Sachs’s Global Macro Conference in London.
Investors will get more insight into the economy’s strength this week as two reports are forecast to show growth in payrolls in May. U.S. companies added 165,000 employees last month, ADP Research Institute will say tomorrow, according to a Bloomberg News survey of economists, and government data on June 7 is predicted to show similar growth.
The Fed stimulus, and better-than-expected corporate earnings, have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 141 percent from a 12-year low in 2009. The gauge has fallen 2.2 percent since May 17.
The Dow’s decline today snapped a streak of gains on 20 straight Tuesdays, the longest run since at least 1900, according to data by Schaeffer’s Investment Research. The winning streak is the second-longest for any day of the week, following the Dow’s gain for 24 straight Wednesdays in 1968, the firm’s data show.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 0.6 percent to 16.27. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, has lost 9.7 percent this year.
Eight of 10 groups in the S&P 500 declined today, with banks and energy producers falling at least 0.8 percent to pace losses. Chevron slid 0.9 percent to $122.96 and Exxon Mobil dropped 0.9 percent to $90.68. Bank of America Corp. slipped 1.4 percent to $13.36 for a third straight day of drops.
Salesforce.com dropped 7.9 percent to $37.80. The largest maker of online customer-management tools said it signed an agreement to buy e-mail marketer ExactTarget in a deal valued at $2.5 billion. ExactTarget jumped 53 percent to $33.69.
Dollar General slid 9.2 percent to $48.64 for the biggest drop in the S&P 500. The retailer cited “moderating” sales growth for lowering its adjusted-earnings target to as much as $3.22 per share from a previous maximum of $3.30. Analysts projected $3.28, the average of estimates compiled by Bloomberg.
Phone companies rallied 0.9 percent to pace gains among S&P 500 groups. AT&T Inc. jumped 1.7 percent to $35.67.
Monster Beverage Corp., the largest U.S. energy drink maker by sales volume, gained the most in the S&P 500, adding 10 percent to $59.60. The Corona, California-based company said yesterday gross sales the last two months increased 9 percent, an acceleration that is “encouraging,” Stifel Nicolaus & Co. said in a note today.
GM rose 1.6 percent to $34.96. The automaker will rejoin the S&P 500 after it was dropped following the company’s bankruptcy in June 2009. Heinz is being taken private by Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital in a $23 billion buyout. The change may prompt money managers to shift holdings to match the index.
An index that tracks chipmakers surged 0.5 percent for the second-biggest gain among 24 groups in the S&P 500. Intel Corp. advanced 0.5 percent to $25.36, the highest since August.