Equities pared losses today after Fed Bank of Boston President Eric Rosengren said “significant accommodation remains appropriate at this time.” Rosengren, who is a voter this year on monetary policy, also said it would make sense to consider a “modest” reduction in bond purchases after a few more months of improvement in the labor market and economy.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 1.9% to 14.75. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80% of the time, is down 18% for the year after jumping 12% last week.
Concern that slower Fed bond-buying will push Treasury yields higher prompted investors to sell shares of companies that have the highest dividend yields. Utility stocks fell 1.4% as a group, while telephone companies lost 1.3%. The two industries yield the most in the S&P 500.
While yield-seeking investors drove defensive stocks to among the biggest gains in the S&P 500 in the first quarter, they’ve been lagging other industries quarter-to-date, with utilities, phone companies and consumer-staple stocks the worst performers.
Utilities, which yield 4.1%, fell for the fifth straight day today, the longest losing streak of the year. Consolidated Edison Inc., the supplier of power to New York City, slumped 1.6% to $57.63.
Phone companies, which yield 4.4%, dropped for a third straight day. Verizon Communications Inc. lost 2.2% to $49.71 and AT&T Inc. retreated 0.5% to $35.99.
Consumer-staple stocks fell 1.8%. The group’s dividend yield is 2.8%. Procter & Gamble, the world’s largest maker of consumer products, slumped 2.4% to $78.94. Johnson & Johnson, the health-care products maker, slid 2.3% to $85.60.
McDonald’s Corp. retreated 2% to $99.25. The world’s largest restaurant chain’s global comparable sales were down 0.9% through April this year, according to Chief Executive Officer Don Thompson at an investor conference today. David Palmer, an analyst at UBS AG in New York, lowered his full-year profit forecast for McDonald’s because of a “modestly worse” European consumer environment and greater foreign currency headwinds.
The S&P Supercomposite Homebuilding Index tumbled 4% as all 11 companies in the gauge retreated. Lennar sank 4.5% to $40.33, and PulteGroup fell 3.3% to $22.03.
SLM Corp. rallied 2.1% to $23.47. The student lender known as Sallie Mae is seeking to separate its education loan management and consumer banking businesses into two publicly traded entities.
Smithfield Foods Inc. jumped 30% to $33.63 after Shuanghui International Holdings Ltd. agreed to acquire the pork processor for $4.72 billion. Shuanghui will pay $34 a share for Smithfield, a 31% premium over yesterday’s closing share price.
Tyson Foods Inc. also rose, increasing 2% to $25.35.