U.S. stocks erased losses, after an early decline in the Standard & Poor’s 500 Index, as better-than-estimated data on consumer confidence and manufacturing tempered impending federal spending cuts.
Groupon Inc. rallied 5.8% after firing its chief executive officer. Raw-material companies fell as commodities tumbled after a report showed China’s manufacturing slowed. Freeport-McMoRan Copper & Gold Inc. lost 1.2%.
The S&P 500 slipped less than 0.1% to 1,514.47 at 10:43 a.m. in New York, after declining as much as 0.9% earlier. The Dow Jones Industrial Average rose 5.45 points, or less than 0.1%, to 14,059.94. Trading in S&P 500 companies was in line with the 30-day average at this time of day.
“Many market observers have been expecting that the budget cuts will take effect,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “It appears that the U.S. economy has enough momentum, but a weakening macro backdrop just at the point when sequestration starts would be cause for concern.”
Stocks pared declines today after the Institute for Supply Management said its factory index rose to 54.2 in February from 53.1 a month earlier. Economists projected the gauge would ease to 52.5, according to the median forecast in a Bloomberg survey. A reading greater than 50 signals expansion.
Consumer spending in the U.S. rose in January even as incomes dropped by the most in 20 years, showing households were weathering the payroll-tax increase by socking away less money in the bank. Outside the U.S., data showed China’s manufacturing slowed for a second month while factory output in the euro area contracted for the 19th straight month.
Spending Cuts
U.S. stocks erased gains in the final minutes of trading yesterday after a Senate vote kept automatic spending cuts in place. Democrats and Republicans are in a standoff over how to replace the cuts totaling $1.2 trillion over nine years, $85 billion of which would occur in this fiscal year. President Barack Obama’s meeting with congressional leaders today won’t yield a breakthrough, members of both parties say.
Federal Reserve Bank of Chicago President Charles Evans said the Fed should press on with $85 billion in monthly bond buying, warning that a premature withdrawal of stimulus risks hobbling the recovery the biggest industrial metals user..
“We need to be careful not to undermine our own policies and remove accommodation prematurely, as the Japanese did,” Evans said yesterday in a speech in Des Moines, Iowa.
Record Highs
The S&P 500, which is trading at about 4% below its record, has gained 6.1% this year as lawmakers agreed on a compromise on taxes and amid better-than-estimated earnings. The benchmark index rose 1.1% in February, capping a four-month rally, the longest stretch since September. The Dow is about 1% from its record high reached in October 2007. Citigroup slid 1.9% to $41.17.
Raw-material companies retreated. Freeport-McMoRan fell 1.2% to $31.53 as copper and aluminum sank to three-month lows after the manufacturing report out of China, the biggest industrial metals user.
Groupon Gains
Groupon advanced 5.8% to $4.79. The daily-deals company ousted Andrew Mason as chief executive officer a day after reporting results that disappointed investors. Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis will oversee the company as it seeks a successor.
Deckers Outdoor Corp. jumped 12% to $45.17 after the owner of the Ugg brand forecast a gain of about 7% in 2013 revenue that exceeded analysts estimates.
Gap Inc. rose 2.8% to $33.85. The biggest U.S. specialty-apparel retailer posted fourth-quarter profit that topped analysts’ estimates, fueled by its best holiday shopping season in six years.
