U.S. stocks decline as investors speculate on Fed stimulus moves

U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for the sixth time in eight days, as speculation increased that the Federal Reserve will scale back stimulus this year amid signs the global economy is strengthening.

Macy’s Inc. fell 4.4% as the department-store chain cut its profit forecast after weaker-than-estimated quarterly sales. Cree Inc. tumbled 21% after forecasting lower first-quarter profit than analysts had anticipated. Apple Inc. climbed 1.4%, extending a rally after billionaire investor Carl Icahn said yesterday he’s an Apple shareholder.

The S&P 500 fell 0.3% to 1,688.82 at 10:44 a.m. in New York. The benchmark gauge has dropped 1.2% since a record high on Aug. 2. The Dow Jones Industrial Average declined 76.72 points, or 0.5%, to 15,374.29. Trading in S&P 500 stocks was 16% below the 30-day average during this time of day.

“What the market is trying to split here is on Fed tapering,” Douglas Cote, chief market strategist at ING U.S. Investment Management in New York, said in a telephone interview. His firm oversees $190 billion. “The Fed is in a balancing act. Inflation is a proxy for growth. When you have low inflation, it’s not good news for growth. Quantitative easing is creating some excess in the financial system.”

U.S. equities rose yesterday, halting a two-day decline, after Commerce Department data showed retail sales increased 0.2% in July, following a 0.6% gain in June that was larger than previously reported. The index erased earlier losses during the session, extending to a ninth day the trend where it reached its lowest point before noon, data compiled by Bloomberg show.

Fed Tapering

The S&P 500 has dropped from its record high this month amid growing speculation the Fed will pare stimulus this year as the economy strengthens. The central bank will probably reduce its $85 billion in monthly bond purchases at its meeting on Sept. 17-18, according to 65% of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction at next month’s meeting.

“The U.S. markets are in a limbo at the moment during the summer period,” Didier Duret, chief investment officer for ABN Amro Private Banking, which manages 165 billion euros ($219 billion), said by phone from Amsterdam. “It’s had a great run and volumes aren’t particularly large. Many people are away and, by September, people will start investing with 2014 in mind.”

A report today showed wholesale prices in the U.S. were little changed in July, reflecting the biggest drop in auto costs in four years. The steady reading in the producer price index followed a 0.8% gain in June, a Labor Department report showed today in Washington. The median estimate in a Bloomberg survey of 73 economists projected a 0.3% rise.

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