U.S. Stocks Decline From Records to Pare December GainsJoseph Ciolli
U.S. stocks fell, after the Standard & Poor’s 500 Index closed yesterday at a record for the 53rd time this year, as technology and utility companies sank the most in 18 months.
The S&P 500 dropped 0.5 percent to 2,080.35 at 4 p.m. in New York. The Dow Jones Industrial Average lost 55.16 points, or 0.3 percent, to 17,983.07. The Nasdaq 100 Index slid 0.7 percent as Apple Inc. lost 1.2 percent to pace declines among technology shares. Utility shares in the S&P 500 plunged 2.1 percent, the most since June 2013. About 4.7 billion shares changed hands on U.S. exchanges, more than 30 percent below the three-month average.
“We could be seeing a little bit of profit-taking coming into year-end,” David Lafferty, who helps oversee $894 billion as the chief market strategist for Natixis Global Asset Management in Boston, said in a phone interview. “Volume will tend to be very light through year-end, and we anticipate it being quiet.”
The S&P 500 has climbed 0.6 percent in December as the world’s largest economy expanded at the fastest pace in more than a decade and the Federal Reserve pledged to be patient on the timing of interest-rate increases.
The S&P 500 and Russell 2000 Index closed at all-time highs yesterday, while the Dow was near a record after climbing above 18,000 last week for the first time. The Nasdaq Composite Index finished at the highest level since March 2000.
December’s advance has extended the S&P 500’s rally for the year to 13 percent while the Dow has increased 8.5 percent. The Russell 2000 has advanced 4.3 for the year.
The gains for U.S. equities come amid a slump for much of the rest of the world. While the S&P 500 is heading for a third straight annual advance, the MSCI World Index excluding the U.S. is down 6.2 percent for the year.
The S&P 500 is trading at 17.4 times estimated profit, according to data compiled by Bloomberg. That’s about 9 percent above the multiple for the MSCI All-Country World Index.
Optimism about the economy’s strength helped the S&P 500 fully recover from a 5 percent loss earlier in the month. Equities reached highs last week after government data showed U.S. gross domestic product increased at a 5 percent annual rate from July through September, the fastest pace since 2003. Stocks extended gains from the previous week, when the Federal Reserve pledged patience in raising interest rates.
“The U.S. economy is doing well,” Herbert Perus, who helps oversee $36 billion as head of equities at Raiffeisen Capital Management in Vienna, said in an interview. “Some stocks seem overpriced, but if you look deeper into the market you find a lot of good managed companies with good products that are still not expensive.”
A report today showed consumer confidence increased less than estimated this month. The Conference Board’s consumer confidence index increased to 92.6 in December from 91 a month earlier. The median forecast in a Bloomberg survey called for a gain to 93.9. Another report showed home prices in 20 U.S. cities rose at a slower pace in the year ended in October.
“The United States is doing better than anybody else, but we’re still not doing all that well,” former Fed Chairman Alan Greenspan said today in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “We still have a very sluggish economy.”
Greenspan said the economy won’t fully recover until American companies invest more in productive assets and the housing market bounces back.
The rebound in the S&P 500 from a two-month low on Dec. 16 low is the latest of recoveries from upheavals that threatened to derail a bull market in its sixth year. The S&P 500’s worst retreat was only 7.4 percent, and the gauge recovered from each of its declines of 4 percent or more within one month.
The S&P 500 hasn’t had a four-day drop in a year. The benchmark gauge has declined for four consecutive trading sessions at least once every year since at least 2000. It also hasn’t had a decline of 10 percent or more over any period since October 2011.
The Chicago Board Options Exchange Volatility Index, a measure of demand for options on the S&P 500, gained 6.5 percent to 16.04 today, rising for a third straight day. The gauge, also known as the VIX, has tumbled 32 percent from a two-month high on Dec. 16.
All of the 10 major groups in the S&P 500 retreated today. Energy, industrial, technology and utility shares lost at least 0.5 percent.
The decline in utility shares today pared their advance this year to 27 percent, the most among the 10 industries.
Apple dropped 1.2 percent and Microsoft Corp. slipped 0.9 percent. Red Hat Inc. declined 1.2 percent.
Expedia Inc. lost 2.5 percent after FBR Capital Markets analyst Jake Fuller said consensus expectations for U.S. bookings growth in the high 20 percent range “could be a stretch.”
Southwestern Energy Co., an oil and natural gas producer, slipped 6.8 percent after saying it may sell as much as $2.15 billion of equity. Energy companies have lost 9.3 percent as a group this year for the biggest decline in the S&P 500, as crude prices tumbled into a bear market.