S&P 500 Halts Four-Day Rally Amid Concerns on ValuationOliver Renick and Joseph Ciolli
The Standard & Poor’s 500 Index slipped, halting a four-day streak of record closes, as investors weighed equity valuations. The Dow Jones Industrial Average closed at an all-time high.
EBay Inc. dropped 2.7 percent after saying David Marcus will step down as the head of its PayPal unit to join Facebook Inc. Facebook rallied 4.6 percent to the highest since March. RadioShack Corp. plunged 10 percent after reporting a wider quarterly loss. Molson Coors Brewing Co. jumped 5.4 percent for the biggest gain in the equities benchmark. Electronic Arts Inc. added 2.3 percent after disclosing release dates for new games.
The S&P 500 fell less than one point to 1,950.79 at 4 p.m. in New York, trimming an earlier decline of 0.3 percent. The Dow average added 2.82 points, or less than 0.1 percent, to 16,945.92, erasing earlier declines in the final hour of trading to extend a record. About 5.2 billion shares changed hands on U.S. exchanges, 17 percent below the three-month average.
“It shouldn’t be a shock to anyone that we’re seeing softness after a blistering recovery,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, from Florham Park, New Jersey, said in a phone interview. “This is a temporary reprieve from a market that’s being seeing highs.”
The S&P 500 has advanced 7.4 percent since a low on April 11 as data showed the U.S. economy is recovering from the impact of extreme weather earlier this year. The gauge rallied last week after the European Central Bank announced a stimulus package and American jobs data topped estimates.
The equities benchmark trades at 16.5 times the projected earnings of its members, up from a multiple of 14.8 times at the beginning of February. The gauge’s 14-day relative strength index was 73.7 yesterday, above the 70 reading that some investors see as a signal to sell.
Profit for companies on the gauge will probably climb 7.4 percent in 2014, analysts predict. That’s down from a January projection for growth of 9.7 percent. Sales probably gained 3.5 percent this year on average, according to estimates compiled by Bloomberg.
The S&P 500 has risen for nearly 32 months without a decline of 10 percent or more, versus the average of 18 months since 1945, according to data from S&P Capital IQ strategist Sam Stovall. In 2011, the S&P 500 index dipped as much as 19 percent from late April through early October, the closest the market’s come to ending the bull market that began in 2009.
Three rounds of Federal Reserve bond buying have helped propel the S&P 500 higher by as much as 188 percent from its bear-market low in March 2009. Fed officials are watching the labor market as they move to complete the stimulus program late this year.
Data today showed U.S. wholesale inventories increased 1.1 percent in April, more than the 0.6 percent gain estimated by economists. A separate report showed job openings rose to 4.5 million in April from 4.17 million in March.
“When you look at the behavior of the market over the past 10 days, setting record after record, the bulls have clearly been in the lead,” Francois Savary, who helps oversee about $9.5 billion as chief investment officer at Reyl & Cie., said by phone from Geneva. “But even with improving economic data, I think that the U.S. market may have gone too far too fast, and I don’t see too much potential from here.”
The Chicago Board Options Exchange Volatility Index slipped 1.4 percent to 10.99. The gauge, known as the VIX, dropped 5.9 percent last week to 10.73, the lowest level since February 2007.
Six of the 10 main S&P 500 groups retreated today, with industrial and utility stocks dropping 0.3 percent to lead declines.
EBay dropped 2.7 percent to $48.25. Marcus, 41, is leaving PayPal on June 27, according to a statement yesterday from EBay. He will lead Facebook Inc.’s mobile-messaging business, a spokeswoman at the social-network operator said. Facebook added 4.6 percent to $65.77, the highest since March 21.
Allergan Inc. slid 0.7 percent to $163.09 after the Botox maker’s board unanimously rejected a takeover offer from Valeant Pharmaceuticals International Inc. The board said the unsolicited proposal, with the backing of Pershing Square Capital Management LP, undervalues the company. Valeant shares dropped 0.9 percent for a sixth day of losses, the longest streak in two years.
RadioShack slid 11 percent to $1.38. The struggling electronics retailer reported a loss of $98.3 million last quarter and said sales slid for the ninth straight time.
Tyson Foods Inc. slid 3.8 percent to $36.07, capping a sixth day of losses, the longest streak since September. The largest U.S. meat company closed yesterday at the lowest since February after raising its offer for Hillshire Brands Co. to about $7.7 billion.
Urban Outfitters Inc. slid 3.7 percent to $33.39, snapping a five-day losing streak. The retailer said sales at stores open at least a year are unchanged so far in the second quarter compared to a year ago.
MetLife Inc. gained 0.7 percent to $55.05. The largest U.S. life insurer announced it will repurchase $1 billion of common stock in its first repurchase since 2008.
Receptos Inc. surged 37 percent to $39.94. A second-phase trial showed its RPC1063 treatment reduced brain lesions in patients with relapsing multiple sclerosis, according to a statement.
Molson Coors Brewing gained 5.4 percent to a record $70.71. North America’s second-biggest beer company’s earnings gain of 83 percent in the first quarter was the most among 14 North American beverage peers, according to Bloomberg Industries.
Electronic Arts added 2.3 percent to $35.70, the highest since 2008. The company said its “Battlefield” game will be available in North America in October and customers can pre-order from GameStop Corp. starting today. The retailer’s shares added 2.1 percent to $37.29.