S&P 500 Slumps as Fed Considers Reducing Bond Purchases
J.C. Penney Co. (JCP) jumped 8.4 percent as its sales decline abated in the third quarter. Yahoo (YHOO)! Inc. advanced 2.9 percent after the owner of the largest U.S. Internet portal boosted its stock-buyback plan by $5 billion. Deere & Co. (DE) rose 2.1 percent as it forecast better-than-estimated annual earnings on rising demand for construction and forestry machinery. Lowe’s (LOW) Cos., the second-biggest home improvement retailer, slipped 6.2 percent after profit trailed analysts’ projections.
The S&P 500 fell 0.4 percent to 1,781.37 at 4 p.m. in New York. The Dow Jones Industrial Average retreated 0.4 percent to 15,900.82 and has topped 16,000 for three straight days before returning below the threshold. About 5.9 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“We’ve also had a very, very good year, so this may be a decision-making point for those who have enjoyed a very good return in the equity market,” Paul Mangus, head of equity strategy and research for Wells Fargo Private Bank in Charlotte, North Carolina, said in a phone interview. His firm manages $170 billion. “The minutes were a continuation of what the FOMC has been saying all along.”
The S&P 500 has rallied 25 percent in 2013, poised for its best year in a decade, following stimulus from the Fed and better-than-estimated earnings. The gauge traded for about 17 times its companies’ reported earnings at its last record on Nov. 15, the highest valuation since May 2010.
Policy makers expected that the economic data will show ongoing improvement in the labor market and “thus warrant trimming the pace of purchases in coming months,” according to the record of the Federal Open Market Committee’s Oct. 29-30 gathering. Stocks pared gains earlier as Fed Bank of St. Louis President James Bullard said a reduction in bond buying is “on the table” for the next policy meeting in December.
As of yesterday, four of five investors expected the Fed to delay a decision to begin reducing its bond buying until March 2014 or later, with just 5 percent looking for a move next month, according to the latest Bloomberg Global Poll. Only one in 20 said the central bank will begin to reduce its purchases at its Dec. 17-18 meeting, according to the poll yesterday of investors, traders and analysts who are Bloomberg subscribers.
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options known as the VIX, was little changed at 13.40 today. The measure is down 26 percent this year.
J.C. Penney jumped 8.4 percent to $9.44. Chief Executive Officer Mike Ullman showed progress in reviving the department-store chain ahead of the holiday-shopping season. Revenue in the quarter ended Nov. 2 fell 5.1 percent to $2.78 billion, less than the 27 percent drop in the same period last year. Gross margin, or the percentage of sales left after the cost of goods sold, will improve in the fourth quarter, J.C. Penney said.
Yahoo advanced 2.9 percent to $35.62. The company is returning more cash to shareholders as Chief Executive Officer Marissa Mayer seeks to revive growth. The company will also sell $1 billion in convertible debt maturing in 2018, in a private placement, according to a statement.
Deere climbed 2.1 percent to $84.52. The company said it sees sales of construction and forestry equipment advancing by about 10 percent in the current financial year, partly because of the recovery in the U.S. economy and an increase in housing starts.
Herbalife Ltd. gained 6.5 percent to $70.24. Bill Stiritz, chief executive officer of Post Holdings Inc., the Raisin Bran maker, boosted his holding in Herbalife to 6.4 percent and said he’ll seek talks with the nutrition company.
Stiritz, who previously reported a 5.3 percent stake, said last week that he’s willing to take part in a leveraged buyout of the company that would reward shareholders and help Herbalife fend off allegations by hedge fund billionaire Bill Ackman, who for a year has accused it of operating an illegal pyramid scheme.
BioMarin Pharmaceutical Inc. (BMRN) jumped 3.3 percent to $69.14. The company yesterday received the backing of advisers to the Food and Drug Administration for a drug treating a rare metabolic disease that can affect growth. Vimizim should be approved for Moriquio A syndrome, which can cause joint deformities and contractures, a panel of advisers to FDA voted.
Lowe’s fell 6.2 percent to $47.33. Third-quarter earnings-per-share amounted to 47 cents, falling short of the 48 cents analysts had projected. The company also predicted full-year profit will be $2.15 a share, compared with the $2.19 analysts estimated.
J.M. Smucker Co. slid 6.5 percent to $101.49 for the biggest decline in the S&P 500. (SPX) The maker of peanut butter and fruit spreads cut its sales forecast and said price reductions are hurting margins.
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