U.S. stocks fall on stimulus bets after jobs, factory reports

Fed Debate

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.

Homebuilders Fall

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.

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