Aug. 1 (Bloomberg) -- U.S. stocks fell, reversing earlier gains, as the Federal Reserve’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing.
Knight Capital Corp., one of the largest market makers of U.S. stocks, plunged as much as 26 percent as it experienced technology issues with trading. MasterCard Inc., the second- biggest payments network, slid 2.3 percent as sales missed estimates. Comcast Corp., the largest U.S. cable company, and Allstate Corp., the biggest publicly traded U.S. home and auto insurer, advanced after quarterly earnings beat projections.
Five stocks fell for every three rising on U.S. exchanges at 2:57 p.m. New York time. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,376.43, after advancing 0.4 percent earlier. The Dow Jones Industrial Average lost 25.36 points, or 0.2 percent, to 12,983.32. Trading in S&P 500 companies was up 18 percent from the 30-day average at this time of day.
“The Fed is in a tough place,” said David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc. His firm oversees about $650 billion. He spoke in a phone interview. “The economic data is ambiguous enough to justify doing something or doing nothing. They chose to wait and see. That comes as a disappointment to some people.”
The Fed said the economy has slowed and foreshadowed new steps to boost the weakening expansion. “The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.
Economic Data
U.S. stocks rose earlier as data showing manufacturing weakness from China and Europe boosted speculation policy makers will act to support the economy. Manufacturing in the U.S. unexpectedly contracted for a second month in July, indicating a mainstay of the economy was struggling to improve.
Dozens of stocks swung 10 percent or more without accompanying news in the first minutes of trading, whipsawing investors. Knight Capital Group Inc. told some clients of its market-making unit that a “technical issue” was affecting its systems and advised them to route orders elsewhere.
Knight, which helps execute billions of dollars in equity transactions every day, said the issue was confined to market making and other operations were unaffected. Its stock plunged as investors speculated on its role in the incident, which spurred concern that computers had distorted trading for the second time in two weeks.
The incident, occurring after three Dow stocks fluctuated in regular hourly patterns for a full trading day on July 19, may embolden critics of American market structure who say the computers that dominate trading have become too complex to control. Special curbs adopted after the May 2010 equity crash helped calm today’s volatility.
“All of a sudden, there was choppy trading and some stocks were halted,” Arthur Hogan, a strategist at Lazard Capital Markets LLC, said in a telephone interview. “People were scratching their heads, but it wasn’t a sense of panic. It was more curious. There’s got to be some human error here.”
Goodyear Tire & Rubber Co. rose more than 10 percent just after the 9:30 a.m. open in New York. Manitowoc Co. gained 14 percent, Pandora Media Inc. climbed almost 11 percent and Level 3 Communications Inc. plunged 15 percent before the swings narrowed minutes later, according to data compiled by Bloomberg.
‘Technology Issue’
“An initial review by Knight indicates that a technology issue occurred in the company’s market-making unit related to the routing of shares of approximately 150 stocks to the NYSE,” according to a Knight e-mail from spokeswoman Kara Fitzsimmons. Its own stock declined as much as 26 percent to $7.60, the lowest level since 2005.
Investors also watched corporate results today. About 72 percent of the S&P 500 companies which reported second-quarter earnings beat estimates, data compiled by Bloomberg showed, even as 60 percent missed analysts’ sales forecasts.
MasterCard lost 2.3 percent to $426.67. The company is among global corporations whose earnings have been hit by currency fluctuations against the dollar. Chief Executive Officer Ajay Banga, 52, is pushing the Purchase, New York-based company into emerging markets and gets about 60 percent of revenue from outside the U.S., more than larger rival Visa Inc.’s 45 percent.
Avon Products Inc. fell 2 percent to $15.18. The door-to- door cosmetics seller that rebuffed a takeover offer from Coty Inc. this year reported a 70 percent decline in second-quarter profit amid a sales slump in Europe and China.
Potential Obstacles
Genworth Financial Inc. dropped 8.1 percent to $4.63 after acting Chief Executive Officer Martin Klein listed potential obstacles to separating the U.S. mortgage-insurance unit from the company.
Facebook Inc. slumped as much as 3.9 percent to a record low of $20.87. The stock fell for a fourth straight day after the world’s largest social-networking service reported second- quarter results that showed slowing growth.
Car companies had the biggest decline in the S&P 500 among 24 industries, falling 1.9 percent. Harley-Davidson Inc. retreated 0.4 percent to $43.05. The biggest U.S. motorcycle maker reported second-quarter revenue trailed analysts’ estimates and said currency exchange rates will hurt profit margins.
DreamWorks Animation SKG Inc. plunged 3.9 percent to $18.45. The independent film studio fell after second-quarter results missed analysts’ estimates on lower-than-expected results related to “Madagascar 3.”
Career Education Corp. tumbled 20 percent to $3.78. The for-profit college chain with more than 90 campuses fell a day after reporting a second-quarter loss and disclosing a regulatory investigation.
Take-Two Interactive Software Inc. slid 8.9 percent to $8. The publisher of the “Grand Theft Auto” video games reported first-quarter results and a full-year outlook that fell below analysts’ estimates.
Comcast added 3 percent to $33.52. The company improved its video guide, boosted Internet speeds and added phone features to fight competition from online video companies, satellite- television providers and Verizon Communications Inc.’s FiOS and AT&T Inc.’s U-verse. Comcast has curbed video losses for the seventh consecutive quarter on a year-over-year basis.
Allstate added 6.8 percent to $36.63. Chief Executive Officer Tom Wilson, 54, has been seeking rate increases and changing terms of policies to boost profitability as severe weather increases claims costs and low interest rates put pressure on investment income from the company’s bond portfolio.
Gaming Revenue
Casino companies gained as Macau gaming revenue rose 1.5 percent in July, beating estimates from some analysts who predicted a little changed or lower result on declining demand from mainland Chinese gamblers and the impact of a Hong Kong typhoon. Wynn Resorts Ltd. rose 1.4 percent to $95.04. Las Vegas Sands Corp. gained 1.3 percent to $36.90.
Laboratory Corp. of America Holdings rallied 4.3 percent to $87.73. The company may be the target of a private equity buyout, Reuters reported, citing Mergermarket, a provider of news and data on acquisitions.
Phillips 66 gained 1.3 percent to $38.10. The company, which became the largest U.S. independent refiner after its spinoff from ConocoPhillips earlier this year, said second- quarter profit rose 13 percent on higher fuel margins and announced a plan to buy back shares valued at $1 billion.
Hyatt Hotels Corp. jumped 2.2 percent to $36.34. The chain controlled by the Pritzker family said second-quarter earnings climbed 5.4 percent amid strong demand in major U.S. cities.
