U.S. Stocks Decline as Tech Losses Offset Energy RallyCallie Bost and Lu Wang
The Standard & Poor’s 500 Index tumbled, lashing investors with the biggest stock swings in two months, as companies from Microsoft Corp. to Google Inc. led a selloff in technology shares that overshadowed gains in oil producers.
The S&P 500 fell 0.9 percent to 1,972.74 at 4 p.m. in New York, dropping below its average price for the past 100 days. The Nasdaq 100 Index tumbled 1.6 percent, the most in two months, and S&P 500 technology shares slumped to the lowest since Oct. 30. The Dow Jones Industrial Average dropped 111.97 points, or 0.7 percent, to 17,068.87. More than $9.3 billion shares changed hands on U.S. exchanges, the most since Oct. 16.
“The whole global growth story is being called into question by this drop in oil, and the tech companies are most vulnerable as that’s one of the biggest sectors in terms of getting revenue from overseas,” Karyn Cavanaugh, the New York-based senior market strategist at Voya Investment Management LLC, said by phone. Voya oversees $215 billion. “Tech companies will be affected by that as they’re focused on growth.”
For a second day, investors were whipsawed by stock swings. The S&P 500 fell 0.7 percent in the first 10 minutes of trading, then rebounded, surging as much as 1.4 percent as crude prices erased losses and energy shares rallied. The index reversed gains in the early afternoon, climbed again, only to sink in the final hour. The 44-point move from top to bottom is the biggest for any day since mid-October, when the index was ending its worst retreat in 2014.
Global stocks fell earlier today, with emerging-market equities retreating as much as 1.8 percent, as the benchmark for U.S. oil slid below $54 a barrel. The ruble plunged past 70 to the dollar for the first time as investors shrugged off a surprise Bank of Russia decision to take its key interest rate to 17 percent from 10.5 percent. The iShares iBoxx $ High Yield Corporate Bond exchange-traded fund fell for a ninth day, to the lowest in more than two years. Treasuries and the yen rose.
Equities also fell after a Chinese factory gauge declined to a seven-month low in December and an index of French manufacturing shrank more this month than estimated.
“All the markets are incredibly volatile today from gold to Treasuries to junk bond spreads, stocks and currencies,” Jim Paulsen, who helps oversee $345 billion as chief investment strategist at Wells Capital Management, said by phone from San Francisco. “If oil shows some signs of support, which we did today, you have a lot of people coming in behind it. If it breaks down, you have people getting out not wanting to catch a falling knife.”
The Chicago Board Options Exchange Volatility Index, also known as the VIX, added 15 percent to 23.57. The gauge jumped the most in four years last week. The VIX was at a three-month low on Dec. 5.
The S&P 500 is down 4.6 percent for the month, heading for its first December loss since 2007, after reaching an all-time high on Dec. 5. The gauge is still up 6.7 percent for the year amid better-than-forecast earnings and economic data.
While concern is growing about the strength of the global economy as tumbling oil prices hold down inflation, U.S. central bankers have reason to be upbeat about 2015 as they gather for a policy meeting today and tomorrow.
The U.S. economy is forecast to expand at a 2.9 percent pace, the fastest in a decade, according to a survey by Bloomberg, while falling gasoline prices leave consumers more money to spend on other goods, boosting confidence and retail sales.
Data in the U.S. today showed new-home construction exceeded a 1 million annualized pace in November for a third consecutive month, continuing a slow recovery in the housing market.
The Fed will look past low inflation and drop a pledge to keep interest rates near zero for a “considerable time” as it seeks an exit from the loosest monetary policy in its 100-year history, economists said before the central bank’s policy decision tomorrow.
“There continues to be a backdrop of the U.S. economy improving and we’ll probably see some confirmation from the Fed on that,” Jim Dunigan, chief investment officer at PNC Bank NA, which oversees $130 billion, said by phone from Philadelphia. “We’re trading a lot on headlines and much of that has been dominated by crude, credit and currencies, so not exactly the fundamentals to make good equity decisions.”
Seven of 10 major groups in the S&P 500 declined today, with technology and consumer-discretionary shares slumping at least 1.5 percent.
Amazon.com Inc. and Google Inc. each declined 3.6 percent to lead losses in the Nasdaq 100. JPMorgan Chase & Co. analyst Douglas Anmuth cut his 12-month price-target on Google today to $600 from $670, while maintaining an overweight rating, the equivalent of buy.
Netflix Inc. and Yahoo! Inc. slumped at least 2 percent. Apple Inc. lost 1.4 percent.
Whirlpool declined 4.9 percent as the company revised its 2014 earnings projection to between $10.90 and $11.10, compared with an earlier estimate of between $11.50 and $12. The maker of home appliances cited “unfavorable” currencies and expenses related to two acquisitions.
Energy shares in the S&P 500 gained 0.7 percent today. The group has lost 16 percent over the past month, and has plunged 26 percent from a June high. Crude fell about 45 percent this year as the Organization of Petroleum Exporting Countries sought to defend market share amid a U.S. shale boom that’s exacerbating a global glut.
Range Resources Corp., Transocean Ltd. and Diamond Offshore Drilling Inc. advanced more than 3.2 percent. Chevron Corp. added 0.8 percent.
“The energy sector’s been hit so hard that it’s not going to take much for those stocks to turn around,” Ben Wallace, a portfolio manager at Westborough, Massachusetts-based Grimes & Co Inc., said by phone.
Boeing Co. added 1.8 percent after boosting a stock buyback plan to $12 billion and raising its quarterly dividend by 25 percent. CVS Health Corp. jumped 2.7 percent to $92.31, the highest ever, after announcing a buyback plan of as much as $10 billion and increasing its dividend by 27 percent. 3M advanced 1.4 percent. The maker of Post-it notes and Scotch tape also boosted its dividend as it projected a gain in 2015 profit.
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