S&P 500 Falls From Record Levels as Commodity Shares Drop

U.S. stocks fell, after the Standard & Poor’s 500 Index climbed to a record last week, as commodity shares slumped with copper and oil prices amid concern over China’s economy.

Freeport-McMoRan Copper & Gold Inc. fell 2.1 percent. DuPont Co. slid 2 percent after it said results will be “challenged” by the unusually cold North American winter and disruptions in Ukraine. Urban Outfitters Inc. and American Eagle Outfitters Inc. dropped more than 4.2 percent as first-quarter forecasts disappointed investors. McDonald’s Corp. rose 3.8 percent after an executive said the company may look to cut costs and borrow more cash to return to investors.

The S&P 500 fell 0.5 percent to 1,867.63 at 4 p.m. in New York. The benchmark index closed at an all-time high of 1,878.04 on March 7. The Dow Jones Industrial Average lost 67.43 points, or 0.4 percent, to 16,351.25 today. About 7 billion shares changed hands on U.S. exchanges, 4.9 percent more than the three-month average.

“China is a big importer of copper and intraday that triggered a little bit of fear in equities,” Joe Bell, senior equity analyst at Cincinnati-based Schaeffer’s Investment Research Inc., said by phone. “Copper is somewhat related to the health of the global economy, so that could have pushed people to take some money off the table.”

Commodities shares declined at least 1 percent today, with Freeport-McMoRan dropping 2.1 percent to $30.71. Copper futures slid as much as 3 percent to the lowest level since July 2010 as signs of slowing economic growth in China sparked concern demand will slump.

China’s Economy

China’s credit growth trailed analysts’ estimates in February, the People’s Bank of China said yesterday. China had its first onshore bond default after Shanghai Chaori Solar Energy Science & Technology Co., a solar-panel maker, last week failed to make an interest payment.

“People are starting to reevaluate the China demand scenario, not only from economic data, but also from this first ever corporate-debt default inside the country,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “How many more companies out there are going to default?”

The S&P 500 fell less than 0.1 percent yesterday as a report showed Chinese exports unexpectedly declined last month and Ukraine began military drills.

Fed Stimulus

The S&P 500 rallied 4.3 percent in February after Federal Reserve Chair Janet Yellen said the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 176 percent from a 12-year low, as U.S. equities begin the sixth year of a bull market that started March 9, 2009.

The Fed is trying to determine how much of the recent economic cooling has been due to weather. U.S. employers added more workers than estimated in February, a Labor Department report showed last week. Other reports indicated manufacturing expanded faster than projected last month, while consumer spending rose more than estimated in January.

“The equity market is going to make continued progress in a two-steps-forward, one-step-back kind of progression,” Jim Russell, who helps oversee $115 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “We’re still evaluating how much of the economic weakness is weather related and how much of it is legitimate.”

Ukraine Crisis

Investors also continued to watch the situation in Ukraine. Russia is wresting control of Ukraine’s Crimean peninsula, home to its Black Sea Fleet, sparking the worst crisis between Russia and the West since the Cold War. The European Union told Russia it must switch course in Crimea by next week or risk more sanctions as Ukraine’s deposed president warned of a possible civil war.

Ukraine’s Interior Minister Arsen Avakov said today the country may mobilize 20,000 people to protect its borders. Ukraine says Russia has almost 19,000 soldiers in Crimea, which holds a referendum on March 16 on whether to secede.

Investors have added $13.1 billion to U.S. equity exchange-traded funds in the past five days and withdrawn $8.2 billion from bond ETFs, data compiled by Bloomberg show. Real-estate stocks absorbed the most money among industry ETFs, taking in $564 million during the past week.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, rose 4.2 percent to 14.80. The measure has climbed 7.9 percent this year.

Oil Companies

Nine of 10 main industries in the S&P 500 declined today, with energy companies slipping 1.2 percent for the biggest loss. Oil prices dropped 1.1 percent, touching below $100 a barrel, on speculation a government report will show U.S. supplies rose last week. Exxon Mobil Corp. slid 1.6 percent to $94.01 and Chevron Corp. lost 1.2 percent to $114.51. Energy explorer Pioneer Natural Resources Co. tumbled 3.3 percent to $188.58.

DuPont slid 2 percent to $66.01. The largest U.S. chemical maker by market value said in a regulatory filing yesterday that first-quarter sales and earnings will be affected by winter weather and the situation in Ukraine. The company maintained its 2014 forecast for operating earnings, citing an improvement in global industrial production and lower agriculture input costs.

Urban Outfitters slipped 4.3 percent to $35.91. Chief Executive Officer Richard Hayne said he expects poor weather to contribute to lower sales and profit margins in the first quarter for its Urban Outfitters-branded shops. The clothing retailer also reported earnings of 59 cents a share for the fourth quarter, beating the average analyst estimate of 54 cents.

American Eagle

American Eagle Outfitters lost 7.8 percent to $13.10. The teen-apparel retailer seeking a new chief executive officer said it would break even in the current quarter. The average of analysts’ estimates compiled by Bloomberg was for profit of 12 cents a share. Same-store sales will fall by a high single-digit percentage, the company said, a worse performance than the 2.3 percent decline analysts projected.

General Motors Co. fell 5.2 percent, the most in two years, to $35.18. The U.S. Justice Department has started a preliminary investigation into how the carmaker handled the recall of 1.6 million vehicles with faulty ignition switches linked to at least 13 deaths, said a person familiar with the probe.

The inquiry is focusing on whether GM violated criminal or civil laws by failing to notify regulators in a timely fashion about the switch failures, said the person, who asked not to be named and isn’t authorized to discuss investigations.

Fannie, Freddie

Financial shares retreated 0.7 percent as a group. Goldman Sachs Group Inc. slid 2.1 percent to $169.89 and JPMorgan Chase & Co. declined 1.7 percent to $58.19.

Fannie Mae plunged 31 percent to $4.03 and Freddie Mac tumbled 27 percent to $4.04. The U.S.-owned mortgage financiers would be eliminated and private interests would be on the hook for the first 10 percent of mortgage losses under a bill that leaders of the Senate Banking Committee plan to introduce within days.

The bipartisan measure, drafted with input from President Barack Obama’s administration, would replace Fannie Mae and Freddie Mac with a government insurer behind private capital, Senate Banking Committee Chairman Tim Johnson and Senator Mike Crapo said in a statement. The bill would require most borrowers to make down payments of at least 5 percent in the new housing-finance system.

McDonald’s Rallies

McDonald’s increased 3.8 percent to $98.78, for the largest gain in the S&P 500 and the company’s biggest advance since August 2011. Chief Financial Officer Pete Bensen said the world’s largest restaurant chain is “actively looking at ways to optimize our capital structure, while maintaining our long-term financial strength.”

That includes scrutinizing general and administrative expenses and selling stores to franchisees in countries such as China, South Korea and Taiwan, Bensen said at an investor conference.

J.C. Penney Co. jumped 3 percent to $8.67 after Citigroup Inc. upgraded the shares to buy from neutral, saying the company will meet its revenue and margin forecasts this year. The retailer predicted on Feb. 26 that gross margin will improve and same-store sales will increase by a mid-single digit percentage this year.

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