U.S. stocks fell, with the Dow Jones Industrial Average on track for its longest slump in 13 months, as investors weighed minutes of the Federal Reserve’s July meeting that showed officials support reducing stimulus this year if the economy improves.
Staples Inc. plunged 15% after declines in its retail and international business sparked in a reduction in its earnings forecast. Target Corp. slid 3.1% as profit fell 13% amid consumers’ caution in the face of higher taxes and unsteady employment. Lowe’s Cos. jumped 4.3% as the second-largest U.S. home-improvement retailer raised its full- year projection amid a housing recovery.
The Standard & Poor’s 500 Index fell 0.3% to 1,647.31 at 3:44 p.m. in New York, trimming an earlier loss of as much as 0.8%. The Dow dropped 75.46 points, or 0.5%, to 14,927.53. The measure retreated for a sixth day, the longest losing streak since July 2012. Trading in S&P 500 stocks was 4.6% below the 30-day average at this time of day.
“The Fed minutes continue to show this clear uncertainty as to when the monetary tightening will begin,” Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, said in a phone interview. His firm oversees $170 billion. “It will be a seminal moment when they move from the easing they’ve been in for years towards some incremental tightening steps. The minutes are quite clear in the sense that the Fed doesn’t know that we are there yet where the process can begin.”
The S&P 500 fluctuated between gains and losses after the Fed released its minutes at 2 p.m. in Washington, with the gauge rising as much as 0.3%. Growing concern that the Fed would reduce stimulus this year contributed to the index’s 3.4% drop from a record close on Aug. 2 through yesterday. Fed monetary support helped propel the benchmark gauge up more than 150% from its bear-market low in 2009.
The Federal Open Market Committee’s minutes from the July 30-31 gathering released today showed officials were “broadly comfortable” with Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year, with a few saying tapering might be needed soon.
FOMC participants continued to expect economic growth to pick up in the second half of 2013 and “strengthen further.” After the July meeting, policy makers affirmed a pledge to continue bond buying until seeing signs “the outlook for the labor market has improved substantially.” July hiring data, released after the Fed meeting, showed the smallest gain in four months and the lowest jobless rate in more than four years.
Data tomorrow is expected to show that initial jobless claims rose last week, according to estimates compiled by Bloomberg. A report today indicated that sales of previously owned U.S. homes climbed more than forecast in July to the fastest pace since November 2009 as more buyers entered the market before further increases in mortgage rates.
Speculation about the stimulus has whipsawed stocks since May, when Bernanke first indicated policy makers could begin reducing the purchases this year. The benchmark index tumbled 5.8% from a record high on May 21 through June 24. It then rebounded as much as 8.7% to the latest closing record of 1,709.67.
“Everybody is edgy right now,” Mark Lehmann, president of JMP Securities LLC in San Francisco, said in a phone interview. “People are not convinced about what to do, so you’re susceptible” to big intraday market swings like today, he said.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 2.8% to 15.32 today, trimming earlier gains of as much as 11%. The equity volatility gauge is down 15% this year.
Investors have also been keeping an eye on corporate earnings, which have helped the S&P 500 rally 16% this year through yesterday. Of the 472 companies in the S&P 500 that have reported results this period, 72% have posted profit that surpassed estimates, while their combined income increased 3.4%, data compiled by Bloomberg show.
Nine of 10 S&P 500 main industries fell. Utility shares dropped the most, sinking 0.9%, as yields on 10-year Treasury notes approached the highest level in two years, cutting demand for dividends.
Utility companies offer a dividend yield of 4.1%, ranking the highest among 10 industries after telephone stocks. The two groups slumped more than 7.3% in the past three months.
Staples tumbled 15%, the most in a year, to $14.31. The world’s largest office-supplies chain, which suffers from waning consumer demand for products such as ink and toner and computer accessories, cut its outlook after second-quarter results were weaker than it expected.
Target dropped 3.1% to $65.82. The second-largest U.S. discount retailer joins Wal-Mart Stores Inc. and Macy’s Inc. in reporting results that showed the bumpy economy and increased Social Security taxes are making consumers reluctant to spend beyond necessities.
Goldman Sachs Group Inc. slipped 1% to $158. A programming error caused the firm to send unintentional stock options orders in the first minutes of trading, pushing prices on dozens of contracts to a dollar each, according to a person briefed on the matter yesterday and data compiled by Bloomberg.
Any losses for Goldman Sachs, the fifth-largest U.S. bank by assets, won’t be known until exchanges determine which contracts should be canceled, said the person, who requested anonymity because the information is private.
Lowe’s rose 4.3% to $45.97. The second-largest U.S. home-improvement retailer posted second-quarter profit that topped analysts’ estimates and raised its forecast for the year as the housing recovery fuels spending on remodeling.
Garmin Ltd. climbed 5.6% to $40.59 for the biggest gain in the S&P 500. The largest maker of navigation devices was boosted to neutral from sell at Goldman Sachs.
Incyte Corp. surged 35% to $36.45, the highest since November 2000. The drugmaker said a Phase 2 study indicated its Jakafi inhibitor showed a benefit for treating patients with pancreatic cancer.