U.S. stocks fell, sending the Standard & Poor’s 500 Index to a one-month low, as jobs and factory data missed estimates and investors speculated whether the Federal Reserve will taper bond purchases.
All 10 S&P 500 industry groups retreated as raw-materials and financial companies fell the most. An index of homebuilders slumped 1% as mortgage applications dropped for a fourth straight week. Apple Inc. slipped 0.8% after a U.S. trade agency said it infringed a patent owned by Samsung Electronics Co. Microsoft Corp. and Joy Global Inc. fell at least 0.8% following analyst downgrades. Walgreen Co. climbed 1.6% as sales exceeded analysts’ estimates.
The S&P 500 lost 1.2% to 1,612.07 at 2:59 p.m. in New York, the lowest since May 3. The Dow Jones Industrial Average declined 186.84 points, or 1.2%, to 14,990.70. Trading in S&P 500 stocks was 7.6% higher than the 30-day average during this time of day.
Today’s economic data “may throw some cold water on this economic growth story continuing,” Bill Schultz, who oversees about $1.1 billion as chief investment officer at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “So you got this contrast in what the Fed should do. All those cross- currents throw on some caution on the whole market. Investors are taking a pause and a more look-and-see approach than they have in the past, where equities are the only place to be.”
Investors considered mixed data today, as a report from ADP Research Institute showed companies in the U.S. hired fewer workers than projected in May amid federal budget cuts and higher taxes. Separate data from the Commerce Department showed U.S. factory orders in April fell short of estimates. A gauge of service industries, which covers almost 90% of the economy, rose more than forecast.
The economy expanded at a “modest to moderate” pace in 11 of 12 Federal Reserve districts, with broad-based gains ranging from business services to construction and manufacturing, the central bank said today in its Beige Book business survey. The report is based on data collected by its regional banks on or before May 24.
A Labor Department report on June 7 may show employers added 167,000 people to payrolls last month after a gain of 165,000 in April, according to the median of 85 economists’ estimates in a Bloomberg survey.
The S&P 500 has dropped 3.4% since closing at a record high on May 21 as Fed policy makers continue to debate whether the economy is strong enough to begin reducing monetary stimulus.
Fed Bank of Dallas President Richard Fisher, among the most vocal critics of additional easing, and Fed Bank of Kansas City President Esther George, who has dissented against record stimulus at every policy meeting this year, separately called for a reduction in the central bank’s $85 billion in monthly bond purchases yesterday. Atlanta Fed President Dennis Lockhart said earlier this week that “very mixed” economic data makes him “more cautious” about a near-term reduction.
The Fed stimulus and better-than-expected corporate earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 138% from a 12-year low in 2009.
The Chicago Board Options Exchange Volatility Index, or VIX, climbed 7.1% today to 17.42. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80% of the time, reached a six-year low in March and has since surged 54%.
Raw-materials and financial companies sank more than 1.8%, the most among 10 S&P 500 industry groups. Alcoa Inc. fell 1.9% to $8.22 and Bank of America Corp. declined 2.3% to $13.06.
An S&P index of homebuilders sank 1% as all but one of its 11 members fell. The Mortgage Bankers Association’s index slumped 11.5% last week as the highest borrowing costs in more than a year led to a plunge in refinancing.
“Be careful what you wish for,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. His firm oversees $8 billion. “Would you rather have higher rates and a stronger economy or a crappy economy and QE forever? I for one would like higher rates and a stronger economy, but I think people are most concerned with how much just a small uptick in rates had on the home-building sector and everything attached to it.”
D.R. Horton Inc. dropped 1.4% to $22.60 for a fourth day of declines. Toll Brothers Inc. slid 0.8% to $32.65, an eighth straight loss that left the stock at its lowest since April 23. Home Depot Inc., the largest U.S. home-improvement retailer, was among the biggest drops in the Dow, losing 1.8% to $75.23.
Apple dropped 0.8% to $445.78. The International Trade Commission’s decision was the first patent ruling against Apple in the U.S. that affects product sales. It covers the iPhone 4 and iPad 2 3G sold for use on networks operated by AT&T Inc., T-Mobile US Inc. and two regional carriers.
Microsoft fell 0.8% to $34.71. The world’s largest software company was cut to hold from buy at Deutsche Bank AG.
Joy Global, the largest maker of underground mining equipment, retreated 1.8% to $53.07. Goldman Sachs downgraded its recommendation on the stock to neutral from buy, citing a weaker outlook for after-market demand.
General Motors Co. slid 2.3% to $34.17. The U.S. Treasury said it plans to sell 30 million additional shares of the carmaker’s common stock. The Treasury offering, which will include 20 million shares from the UAW union’s GM retiree health-care trust, coincides with the automaker’s inclusion in the S&P 500 as of the close of trading tomorrow.
Fastenal Co. slumped 6.1% to $47.84 for the biggest decline in the S&P 500. The retailer of nuts, bolts and other fasteners said daily sales increased 5.3% last month. That missed the growth rate of at least 6.5% estimated by analysts, according to Wunderlich Securities Inc.
Walgreen advanced 1.6% to $48.81. The largest U.S. drugstore chain reported a 2.8% increase in May sales at stores open at least one year. That beat the average 1.6% gain expected by analysts.
Juniper Networks Inc. jumped 6% to $18.44 fort he biggest gain in the S&P 500. The second-biggest maker of computer-networking equipment is “tracking above historical pattern” so far this quarter as routing spending by service providers picked up, Chief Executive Officer Kevin Johnson said in a presentation at a conference hosted by Bank of America Corp.