U.S. stocks fell after a six-week rally left the Standard & Poor’s 500 Index trading at its most expensive valuation since July 2011.
Google Inc. declined 0.6% as Chairman Eric Schmidt adopted a plan to sell as many as 3.2 million shares in the operator of the world’s most popular search engine. BlackBerry shares slid 4.6% while Apple Inc. rose 0.9%, after Home Depot Inc. said it will exchange 10,000 BlackBerry models with iPhones. AOL Inc. jumped 6.2% after an analyst recommended investors buy the shares.
The S&P 500 fell 0.1% to 1,516.19 at 3:11 p.m. in New York. The equity benchmark last week reached its highest level since November 2007, completing its longest streak of weekly gains since August. The Dow Jones Industrial Average lost 26.11 points, or 0.2%, to 13,966.86 today. Trading in S&P 500 companies was 24% below the 30-day average at this time of day.
“We’re extremely overbought, but that doesn’t mean the market can’t continue higher,” T. Doug Dale, chief investment officer at Jackson, Mississippi-based Security Ballew Inc. Wealth Management, which oversees $500 million in assets, said in a telephone interview. “But investors must be wary of air pockets, as in major downturns that can happen quickly.”
‘Stocks Pause’
The S&P 500 has rallied 6.3% so far in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The index is trading at 15 times reported earnings, up from a low of 13 in 2012 and compared with the six-decade average of 16.4, data compiled by Bloomberg show.
The gauge is about 3% below its record high reached in October 2007. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.
“With the strong start this year, it’d be very understandable if stocks pause here,” James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, said by phone. His firm manages $759 billion. “The focus is going to be what the private sector can do to generate growth. The market understands that the public sector is not going to deliver any big presents.”
Finance Ministers from the 17-member euro area were scheduled to meet today in Brussels to discuss aid to Cyprus and Greece as concern over the region’s sovereign-debt crisis revives. Group of 20 finance chiefs and central bankers will gather in Moscow on Friday.
Obama Speech
In the U.S., President Barack Obama will present his legislative priorities for the year in his annual State of the Union address to a joint session of Congress on Tuesday night. The speech is his first State of the Union after being elected to a second term and he is likely to focus on gun control, immigration law and avoiding automatic spending cuts.
Senate Democrats are close to proposing a $120 billion plan for a 10-month delay in the cuts set to begin March 1, according to a Senate Democratic aide. The aide, who asked not to be identified in discussing the proposal, said half of the cost of delaying the across-the-board cuts would be covered by revenue increases and the other half by spending reductions.
Goldman Sachs Group Inc. cut its three-month recommendation on global equities to neutral from overweight, saying investors “will need time to digest the recent gains.”
“The potential for a strong rally from here is likely to be limited in the near term as U.S. equities are trading slightly above our estimates of current fair value,” Goldman Sachs analysts led by Anders Nielsen and Peter Oppenheimer wrote in a client note dated Feb. 8.
Industry Returns
Eight out of the 10 S&P 500 groups retreated as energy and consumer-discretionary companies fell the most, erasing at least 0.4%. Financial and utility shares added more than 0.1%.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, climbed 1% to 13.15.
Google retreated $4.66 to $780.71. Schmidt’s planned share sales, worth about $2.5 billion, represent 42% of his stake in the company. The sales may take place over a maximum period of a year, Google said.
Green Mountain Coffee Roasters Inc. slipped 4.7% to $43.02. The maker of Keurig brewers and single-serve pods was cut to neutral from buy at Dougherty & Co.
BlackBerry Swap
BlackBerry dropped 75 cents to $15.74, while Apple shares rose $4.29 to $479.27. Home Depot said it will swap out the Canadian company’s phones to its corporate employees and managers with iPhones. The move deals a setback to BlackBerry, formerly known as Research In Motion Ltd., which unveiled a new lineup last month in a comeback attempt after years of losing ground to the iPhone and Android devices.
AOL gained $2.08 to $35.80. The Web publisher that owns the Huffington Post and TechCrunch was raised by RBC Capital Markets LLC to outperform, the equivalent of buy, from sector perform.
Genworth Financial Inc. advanced 2.7% to $9.04. The seller of life insurance and long-term care coverage is in negotiations to sell a wealth-management unit, Reuters reported, citing two people it didn’t identify. The unit and the alternative investments business may be valued at $400 million to $450 million, Reuters said.
Nasdaq OMX Group Inc. climbed 3.5% to $30.50. The second-largest U.S. stock-exchange operator held talks about going private with Carlyle Group LP before discussions broke down over price, according to a person with direct knowledge of the matter. Rob Madden, a spokesman for Nasdaq OMX, declined to comment, saying the company doesn’t speak about “rumors or speculation.” Carlyle’s spokesman Randy Whitestone did not immediately return a call or email seeking comment.
Solar stocks rallied as Germany’s Wacker Chemie AG, the fourth-biggest maker of polysilicon, said it will increase production to meet demand from solar-power developers.
First Solar Inc., the world’s largest thin-film solar manufacturer, climbed 6.4% to $32.35 for the biggest advance in the S&P 500. SunPower Corp. jumped 14% to $9.05 while Yingli Green Energy Holding Co. gained 5.5% to $3.26.
