U.S. Stocks Decline as Banks, Best Buy Slump on EarningsOliver Renick
U.S. stocks fell for a fifth straight day as banks and Best Buy Co. slid after corporate earnings disappointed, while Apple Inc. paced a decline in technology shares.
Bank of America Corp. and Citigroup Inc. fell at least 3.7 percent as both banks reported a drop in fourth-quarter profit as revenue from fixed-income trading declined. Best Buy tumbled 14 percent as the largest electronics retailer warned that price pressure and sluggish demand may hamper results in the coming year. A gauge of homebuilders plunged the most since June 2013.
Equity futures fluctuated earlier in the day after Switzerland’s central bank unexpectedly gave up its minimum exchange rate.
“There’s a lot of uncertainty today,” Thomas Garcia, the head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by phone. “There’s uncertainty about what to do with your Swiss holdings and their competitors, and commodities are all over the place. The other thing is we’ve had mixed economic data and you’ve got earnings this week, which are going to have a big effect on the markets as people keep an eye on the consumer.”
The S&P 500 fell 0.9 percent to 1,992.67 as of 4 p.m. in New York, the lowest close since Dec. 16. The Dow Jones Industrial Average lost 106.38 points, or 0.6 percent, to 17,320.71. The Nasdaq 100 Index retreated 1.4 percent as Apple declined 2.7 percent. About 7.9 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average.
A decline in American retail sales combined with a slump in copper prices weighed on stock markets yesterday, causing the S&P 500 to have its worst start to the year since 2009.
After going through all of 2014 without a losing streak of more than three days, the S&P 500 today completed its second slide of five straight days. The benchmark gauge is down 3.4 percent over the past five days.
The Chicago Board Options Exchange Volatility Index, known as the VIX, rose for a fifth straight day, climbing 4.2 percent to 22.39 to the highest since Dec. 16.
Among today’s data, a Fed gauge of manufacturing in the New York region topped economists estimates, while a Philadelphia-area survey missed forecasts. Separate data showed more Americans unexpectedly filed applications for unemployment benefits last week, indicating companies let go of seasonal workers following the holidays.
Wholesale prices in the U.S. declined 0.3 percent in December, the most in three years, showing little sign that inflation’s bubbling up amid plunging energy costs.
A sustained plunge in energy prices is keeping a lid on inflation throughout the pipeline, from bills for businesses to the consumer’s cost of living. Weak price growth has convinced Federal Reserve officials to remain “patient” in their timing of the first interest rate increase since 2006 after ending monthly asset purchases three months ago.
Concern about the impact of falling oil on investment and earnings growth are testing the resilience of U.S. stocks that have tripled since 2009, as investors speculate that demand for raw materials won’t be enough to eliminate a supply gut.
Copper advanced after losing 5.2 percent yesterday, while gold capped the longest rally in more than six months. Oil lost 4.6 percent for the fourth decline in five sessions. The S&P 500 has moved in the same direction of the commodity 10 out of the past 11 trading sessions.
“Put copper together with oil, the strength of the dollar, and the Swiss National Bank move and what you’ve got is a broader concern about the global growth story similar to what we saw in October,” said Paul Christopher, the St. Louis-based head of international strategy for Wells Fargo Investment Institute, which oversees $1.6 trillion.
Equities futures were whipsawed earlier in the day as the Swiss National Bank unexpectedly gave up its minimum exchange rate of 1.20 per euro today, ending a three-year-old policy designed to shield the economy from the euro area’s sovereign debt crisis.
The latest move marks an attempt by the SNB to reinforce defenses before government bond purchases by the European Central Bank. The change comes just one week before ECB policy makers meet to discuss introducing new stimulus, including quantitative easing, a move that may add to pressure on the franc against the euro.
“The Swiss Bank move was a huge surprise, which was unsettling,” Ron Sanchez, chief investment officer at Fiduciary Trust Company International in New York, said via phone. “The predictability of the market has been a little compromised and markets are moving pretty clearly to risk-off.”
Schlumberger Ltd. is among S&P 500 members reporting quarterly results today. Profit at companies in the index climbed 2 percent in the last three months of 2014, analysts estimate.
Bank of America slipped 5.2 percent to the lowest since August and Citigroup dropped 3.7 percent as both banks reported a drop in fourth-quarter profit as revenue from fixed-income trading declined.
Wall Street firms including JPMorgan Chase & Co. and Citigroup had warned investors that fourth-quarter trading revenue fell amid sharply higher market volatility. While most of the year was marked by low client activity because of unusually calm markets, heightened volatility also makes for a difficult trading environment, Citigroup CEO Michael Corbat said on Dec. 9.
Best Buy tumbled 14 percent. Deflationary pricing, weak demand for some categories of electronics and fewer people buying extended warranties all threaten to weigh on the company’s fiscal year, Best Buy said in a statement today. Sales in the first half will range from flat to a low-single digit drop.
Intel Corp. slumped 1.4 percent in late trading. After the market closed, the largest maker of chips that run personal computers forecast first-quarter sales that may fall short of analysts’ estimates, sparking concern that the PC industry is headed for a steeper decline.
Seven out of 10 groups in the S&P 500 dropped during regular trading. Financial and technology companies had the biggest losses, falling at least 1.3 percent. Apple and Hewlett-Packard Co. dropped more than 2.7 percent. TripAdvisor Inc., Facebook Inc. and Yahoo! Inc. retreated more than 2.7 percent.
BlackBerry Ltd. fell 20 percent after saying it hasn’t engaged in takeover talks with Samsung Electronics Co. The stock soared 30 percent yesterday after Reuters reported that Samsung had recently made a bid valuing the Canadian smartphone maker at as much as $7.5 billion.
Newmont Mining Corp. surged 8.9 percent for the biggest gain in the S&P 500, after losing 6.8 percent over the previous two days.
An S&P index of homebuilders declined 6 percent. Lennar Corp. fell 7.2 percent after the homebuilder reported increased incentives and narrowing margins, adding to concern that the industry is facing reduced profitability. D.R. Horton Inc. slid 7.8 percent for the biggest loss since July. The stock was downgraded to a neutral rating from buy by UBS Securities LLC analyst David Goldberg.
Target Corp. jumped 1.8 percent. The retailer will abandon its operations in Canada after less than two years, putting an end to a mismanaged expansion that racked up billions in losses. The Canadian business is seeking court approval to begin liquidation, the Minneapolis-based retailer said today in a statement. The move will lead to a $5.4 billion writedown.
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