U.S. stocks fall as ecomonists predict Fed will curtail stimulus

U.S. stocks fell, sending the Standard & Poor’s 500 Index to an almost one-month low, as economists predicted the Federal Reserve may reduce stimulus as soon as September.

Exxon Mobil Corp. and Chevron Corp. dropped at least 1.1% as energy producers slumped. Salesforce.com Inc. declined 5.5% after saying it will buy ExactTarget Inc. Dollar General Corp. fell 7.6% after reducing the top end of its full-year earnings forecast. General Motors Co. added 1.6% as S&P said the automaker will replace H.J. Heinz Co. in the benchmark equity gauge.

The S&P 500 fell 0.8% to 1,627.93 at 2:37 p.m. in New York, erasing an earlier gain of as much as 0.4%. The Dow Jones Industrial Average lost 111.57 points, or 0.7%, to 15,142.46. Trading in S&P 500 companies was 6.6% higher than the 30-day average at this time of day.

“We definitely think that equities are going to be more volatile with all the talk of Fed tapering,” David Lafferty, a Boston-based investment strategist at Natixis Global Asset Management, which manages about $785 billion, said in a phone interview. “You can see that volatility in the market jitteriness in the past days. Add to that, that in this slow growth environment, you tend to have more hiccups that you would otherwise have if you were in strong growth phase.”

Economists at Goldman Sachs Group Inc. and Deutsche Bank AG say the Fed could start winding down its bond-buying program, known as quantitative easing, this summer.

$25 billion

The Fed could cut $25 billion in purchases in September, split between $10 billion in mortgage-backed securities and $15 billion in Treasuries, even if this week’s employment data falls short of forecasts, Joseph A. LaVorgna, chief economist at Deutsche Bank Securities in New York, wrote in a note.

While Goldman Sachs’s forecast remains for Fed officials to wait until December before slowing their $85 billion of monthly asset purchases, the firm’s chief economist Jan Hatzius said that so-called tapering could occur sooner.

“A September tapering is certainly possible, I think that is going to depend on the data,” Hatzius said in a Bloomberg Television interview at Goldman Sachs’s Global Macro Conference in London.

The S&P 500 maintained losses after Fed Bank of Kansas City President Esther George in a speech today urged the central bank to slow bond buying as the U.S. economy picks up and investors assume greater risk.

“In light of improving economic conditions, I support slowing the pace of asset purchases as an appropriate next step for monetary policy,” according to a transcript of a talk George was set to give today. “History suggests that waiting too long to acknowledge the economy’s progress and prepare markets for more-normal policy settings carries no less risk than tightening too soon.”

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