U.S. Stocks Fluctuate After S&P 500 Index's Longest 2015 Rally

  • S&P 500 ends streak, slips at levels where past rallies faded
  • Renewed selling in biotechs amid pricing, earnings concerns

A selloff in biotechnology shares dragged the Nasdaq Composite Index lower as equities retreated after nearing their highest levels since the August selloff.

The Standard & Poor’s 500 Index ended its longest winning streak this year, after surging yesterday near where an advance faltered at the end of August, and another rally ran out of steam after the Federal Reserve stood pat on interest rates last month. The Nasdaq Biotechnology Index tumbled 3.8 percent, while energy and raw-materials shares rose as investors continued to favor the beaten-down sectors.

The S&P 500 fell 0.4 percent to 1,979.92 at 4 p.m. in New York, after reaching a two-week high Monday. The Dow Jones Industrial Average gained 13.76 points, or 0.1 percent, to 16,790.19. DuPont Co. jumped 7.7 percent to add 26 points to the Dow after its chief executive, Ellen Krullman, said she intends to retire.The Nasdaq Composite sank 0.7 percent.

“The market is catching its breath after strong run over the past several days,” said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which has about $42.5 billion in assets. “The important thing for me is the market tried to test the August lows and we saw a rebound from there.”

The S&P 500 ended a five-day advance that had restored almost $700 billion to U.S. equity prices, as expectations for a Federal Reserve interest-rate increase were pushed out into next year. That sent the dollar lower and has boosted energy, raw-material and industrial shares amid speculation that a weaker U.S. currency will lift profits for multinational companies which benefit when their overseas earnings are converted back to dollars.

Among the S&P 500’s 10 main groups, raw-materials and energy shares extended their rally to a sixth day Tuesday, the longest for energy since December 2013. Health-care fell the most as biotechs retreated after earnings warnings from companies that sell technology to drug firms and concern about pharmaceutical pricing reignited selling that began three weeks ago. Technology, industrial and phone companies were little changed.

“You’re right at the cusp of the highest closing level since we crashed in August,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc., which oversees $351 billion. “All that is good technically, but one bad thing is leadership. The main leader, health-care, has been AWOL in this rally. That’s probably not a good sign that this is a sustainable rally.”

Health-Care Slumps

Health-care companies fell for the first time in six sessions, with Biogen Inc., Celgene Corp. and Vertex Pharmaceuticals Inc. losing more than 3.6 percent. The Nasdaq Biotech Index dropped for a second day and has slumped 15 percent since Democratic presidential candidate Hillary Clinton criticized “price gouging” in the industry two weeks ago. Pfizer Inc. declined 2.1 percent after climbing 8.6 percent in the prior five days.

A rally in commodities boosted raw-materials and energy shares as the dollar continued to slide. Oil surged 4.9 percent to the highest level in a month amid speculation that falling crude production will ease the global supply glut. Chevron Corp. jumped 3.5 percent to a two-month high. Transocean Ltd. added 7.2 percent for its best three-day rally ever, up 26 percent.

DuPont led gains among raw-material companies in the benchmark index amid its biggest advance since 2009. Freeport-McMoRan Inc. rose 5.8 percent. The miner abruptly revamped its board and said it’s considering spinning off its oil and natural gas business, weeks after Carl Icahn disclosed a stake. Alcoa Inc. increased 5.5 percent and is up more than 18 percent in three days, the most in six years.

A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year the world economy will expand 3.6 percent, less than the 3.8 percent projected in July, the fund predicted.

The Chicago Board Options Volatility Index slipped 0.7 percent Tuesday to 19.40, and is down 30 percent after six days of declines. The measure of market turbulence known as the VIX yesterday closed below 20 for the first time since Aug. 20. About 7.7 billion shares traded hands on U.S. exchanges, 4.6 percent above the three-month average.

Day-to-day swings in U.S. equities have abated in the last week, providing some respite from turbulence fueled by concerns about slowing global growth and uncertainty over the Fed’s course of action on rates. After disappointing payrolls data on Friday, traders are now pricing in 33 percent odds of a Fed rate liftoff in December, and a 57 percent chance in March.

Earnings Season

While China’s slowdown and Fed policy have had the heaviest influence on investor sentiment lately, corporate profits will begin to grab more attention. Alcoa unofficially kicks off the reporting season after markets close Oct. 8. Analysts project earnings for S&P 500 members dropped 6.9 percent in the third quarter.

Among other shares moving on corporate news, Skyworks Solutions Inc. sank 1.4 percent, trimming an earlier 9 percent drop, after agreeing to buy PMC-Sierra Inc. for $2 billion in cash. The chipmaker joins Dialog Semiconductor Plc., Intel Corp. and Avago Technologies Ltd. in buying industry colleagues in the past year. Avago slid 3.4 percent today while Intel gained 1.7 percent. PMC-Sierra jumped 33 percent to a nine-year high.

PepsiCo. climbed 1.3 percent to a six-week high after its third-quarter profit topped analysts’ estimates. The company also raised its forecast for the year as North American snack and beverage sales climbed, helped by higher prices.

A Bloomberg index of U.S. airlines fell 4.4 percent, the steepest slide since May amid speculation on higher fuel prices as oil rallied. Alaska Air Group Inc. and American Airlines Group Inc. declined more than 5.1 percent.

Before it's here, it's on the Bloomberg Terminal.