S&P 500 Falls for 5th Day as Small-Caps Tumble With OilMichelle F. Davis and Callie Bost
U.S. stocks fell, extending the longest losing streak in the Standard & Poor’s 500 Index in 13 months, as small-cap and energy shares slid after oil pushed further below $50 a barrel.
Southwestern Energy Co. and Range Resources Corp. fell at least 2.6 percent as energy shares tumbled a second day to a three-week low. JPMorgan Chase & Co. slid 2.6 percent to lead declines in the Dow Jones Industrial Average. TripAdvisor Inc. plunged 3.7 percent as Internet companies retreated.
The S&P 500 fell 0.9 percent to 2,002.61, declining for a fifth straight day. The Russell 2000 Index slid 1.7 percent, after plunging 2.4 percent earlier. The Dow dropped 130.01 points, or 0.7 percent, to 17,371.64. More than 8.3 billion shares changed hands on U.S. exchanges, 20 percent above the three-month average.
“At this point it’s going to get hard to bottom out this market until you’ve bottomed oil,” Jim Paulsen, who helps oversee $345 billion as chief investment strategist at Wells Capital Management, said by phone. “It’s really got people spooked. I do think oil will bottom and the dollar will peak and it’ll get us away from this mini-panic.”
The S&P 500 plunged yesterday the most since October, completing its first four-day decline since 2013. The benchmark gauge has dropped 4.2 percent since an all-time high reached Dec. 29, and is off to the worst start for a year since 2008. The gauge retreated today below its average price for the last 100 days after yesterday falling through its 50-day moving average.
U.S. equities swung between gains and losses throughout the day, with the S&P 500 erasing an early advance to plummet as much as 1.4 percent. The gauge trimmed losses in late afternoon trading, before resuming losses in the final half hour.
The Chicago Board Options Exchange Volatility Index, a measure of demand for options on the S&P 500, rose 6 percent to 21.12 for the sixth advance in seven days to reach the highest level since Dec. 16.
Bill Gross, the former manager of the world’s largest bond fund, said prices for many assets will fall this year as record-low interest rates fail to restore sufficient economic growth.
With global expansion still sputtering after years of interest rates near zero, investors will gradually seek alternatives to risky assets, Gross wrote today in an investment outlook for Janus Capital Group Inc., where he runs the $1.2 billion Janus Global Unconstrained Bond Fund.
“When the year is done, there will be minus signs in front of returns for many asset classes,” Gross, 70, wrote in the outlook. “The good times are over.”
Oil prices extended their drop below $50 a barrel today, for a fourth day of losses, amid forecasts that U.S. crude inventories will expand. Oil lost almost half its value in 2014 as competing producers resisted calls to cut output, exacerbating a global supply glut.
Energy companies in the S&P 500, which slumped 10 percent in 2014, dropped 1.3 percent today. Eight of the 10 major industries declined, led by energy, technology and financial companies. Phone and utility shares advanced.
Goldman Sachs Group Inc. chief equity strategist David Kostin thinks investors should be looking to buy energy shares.
“Within the market we’re looking for pockets of opportunity,” Kostin said in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “Relative to historical metrics, it’s extremely attractive.”
JPMorgan fell 2.6 percent, bringing a two-day slide to more than 5.6 percent, after Goldman Sachs said in a note published yesterday that the company’s parts are worth more to investors than its whole.
“It could impact their competitiveness relative to their peer group so I think people are a little concerned there,” Todd Lowenstein, who helps manage $16 billion at Highmark Capital Management in Los Angeles, said by phone.
The Dow Jones Internet Composite Index fell for its sixth straight day as TripAdvisor, Pandora Media Inc. and LinkedIn Inc. declined more than 3.5 percent.
Michael Kors Holdings Ltd. plunged 8.4 percent to its lowest since July 2013 after Credit Suisse Group AG cut its rating on the stock, saying slowing handbag demand has led to an increase in discounting.
“It’s a balancing act between bulls and bears,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, said. “Many investors are playing the recovery scenario and will buy on setbacks, but others get nervous after a strong rally. The U.S. economy will have a strong first quarter and this should help stocks rise, but we will have higher volatility.”
Data today showed factory orders declined in November. Service industries expanded in December at the slowest pace in six months, indicating the biggest part of the U.S. economy cooled as the year drew to a close. The Institute for Supply Management’s non-manufacturing index fell to 56.2 from a November reading of 59.3 that was the second-strongest since 2005, the Tempe, Arizona-based group’s report showed today.
Reports on U.S. hiring are also due this week. The Federal Reserve tomorrow releases the minutes from its last policy meeting at which it pledged patience in raising interest rates even as the economy expands.
Investors later this month will evaluate corporate earnings reports to help gauge equity valuations. Alcoa Inc. unofficially starts the earnings season when it reports fourth-quarter results on Jan. 12. Profit at S&P 500 companies probably climbed 2.4 percent in the period, analysts predicted.