U.S. Stocks Decline as Apple Shares, Commodities Producers Slump

Updated on

U.S. stocks declined, after equities posted their best monthly gain since February, as commodities producers sank and Apple Inc. fell into a correction.

Energy companies in the Standard & Poor’s 500 Index lost 2 percent as U.S. crude dropped to a five-month low. Apple fell 2.4 percent, 11 percent below its February high. Tyson Foods Inc. tumbled 10 percent after cutting its earnings forecast. Frontier Communications jumped 9.1 percent after raising its cash flow and capital spending outlooks, and airlines rallied amid crude’s selloff.

The S&P 500 retreated 0.3 percent to 2,098.04 at 4 p.m. in New York, after falling as much as 0.8 percent, to close above its average price during the past 100 days. The Dow Jones Industrial Average lost 91.66 points, or 0.5 percent, to 17,598.20. The Nasdaq Composite Index decreased 0.3 percent. About 6.6 billion shares traded hands on U.S. exchanges, 3 percent above the three-month average.

“China numbers were weak and I think there’s growing concern about the general overseas economic pictures and how that might affect the U.S. economy,” said John Carey, a Boston-based fund manager at Pioneer Investment Management, which oversees about $230 billion. “A lot of mixed signals and crosscurrents here.”

Commodities dropped after an official gauge of Chinese manufacturing slid to a five-month low and Iran said it will be able to bolster crude production within a week of sanctions ending. Apple fell for the ninth time in 10 days, sliding below its average price for the past 200 days for the first time since 2013 on its way to correction territory.

Data Focus

A slide in equities accelerated Monday after the S&P 500 fell below its average price for the past 100 days, a level commonly watched by market technicians. The gauge last dropped below the 100-day moving average on July 24 during its longest losing streak since January.

Stocks pared declines in the final minutes of trading today as the benchmark index surged back above the 100-day level. The S&P 500 is about 1.4 percent above its 200-day average, a point that has stopped the last two declines of more than 2.8 percent.

A report Monday showed American households kept spending in June, capping a stronger quarterly performance for the biggest part of the economy. Separate data showed The Institute for Supply Management’s manufacturing index slipped last month from a June reading that was the fastest since the start of the year.

Focus will turn later this week to the monthly payroll report due Friday, as the Federal Reserve looks for signs of a further pickup in the labor market before raising interest rates. Fed Chair Janet Yellen said in July she expected the central bank to raise its benchmark rate this year, while emphasizing the pace of increases will probably be gradual.

Earnings Season

“At this point the focus is largely falling on the Fed, so the macro becomes the dominant conversation in terms of will they or won’t they,” said Dan Greenhaus, chief global strategist in New York at BTIG LLC. “That’s really the conversation point through what is likely to be a slow month. Everyone’s going to be focusing on the economic data.”

The S&P 500 rose 2 percent in July, as earnings from Amazon.com Inc. and Google Inc. countered declines by commodity companies. The gauge advanced 1.2 percent last week, and is 1.5 percent below an all-time high reached in May.

More than two-thirds of companies in the equity benchmark have reported earnings results, with nearly three-quarters beating profit estimates and half exceeding sales projections. Analysts now forecast a 2.8 percent drop in second-quarter earnings, shallower than calls for a 6.4 percent fall about two weeks ago.

Energy Drops

The Chicago Board Options Exchange Volatility Index rose 3.6 percent Monday to 12.56. The gauge, known as the VIX, on Friday posted its biggest monthly drop since February, down more than 33 percent.

Five of the S&P 500’s 10 main groups decreased today, led energy, raw-material and technology companies, while utility shares rose the most. The Bloomberg Commodities Index fell 1.5 percent, down for a third straight session to a 13-year low.

Consol Energy Inc. plummeted 7.6 percent, the most since October 2011, while Noble Energy Inc. and Chesapeake Energy Corp. dropped more than 4.2 percent. West Texas Intermediate crude reached its lowest since March. Alpha Natural Resources Inc. plunged 24 percent to a record low after filing for bankruptcy, becoming the latest victim of the coal industry’s worst downturn in decades.

Sears Tumbles

Freeport-McMoRan Inc., Newmont Mining Corp. and Alcoa Inc. all declined for a third day, losing more than 2.3 percent amid the slide in commodities prices. Newmont was at its lowest since April 2001.

Shares of handbag makers Coach Inc. and Michael Kors Holdings Ltd. weighed on the consumer discretionary group, losing more than 2.4 percent after analysts warned that slumping sales will probably continue. Hanesbrands Inc. dropped another 6.4 percent, after losing 9.1 percent Friday following disappointing results. It’s the stock’s worst two-day retreat in more than six years.

Sears Holdings Corp. tumbled 10 percent to the lowest since January 2012. The retailer run by hedge fund manager Edward Lampert posted a 10.6 percent drop in same-store sales last quarter, its second consecutive period of double-digit declines.

Airlines Rally

Consumer staples rose, despite the drag from Tyson Foods’ biggest drop in more than six years. Clorox Co. gained 2.7 percent to an all-time high after quarterly profit and revenue were above analysts’ estimates. Reynolds American Inc. and Monster Beverage Corp. added at least 1.4 percent.

Utilities gained, led by NextEra Energy Inc., after their best month since October. NextEra jumped 2.4 percent to the highest since February after wind and solar power generator NextEra Energy Partners LP agreed to buy seven natural gas pipelines in Texas for $2.1 billion, adding sales of the power plant fuel to Mexico.

Airlines rallied on crude’s pullback, with a Bloomberg gauge of U.S. carriers rising 3.4 percent. Delta Air Lines Inc., American Airlines Group Inc. and United Continental Holdings Inc. each added at least 3.1 percent.