U.S. stocks fell, halting a seven-day win streak for the Standard & Poor’s 500 Index, as materials producers plunged while investors weighed the prospects for Federal Reserve stimulus cuts and watched developments on Syria.
Barrick Gold Corp. dropped 4.7% as the precious metal slumped the most in nine weeks. Newmont Mining Corp., the largest U.S. gold producer, lost 3.5%. Lululemon Athletica Inc. tumbled 4.4% after cutting its earnings forecast. Walt Disney Co. rallied 3.2% after saying it would buy back as much as $8 billion in shares. Pandora Media Inc. jumped 12% after naming digital-advertising veteran Brian McAndrews as its new chief executive officer.
The S&P 500 fell 0.2% to 1,686.57 at 3:01 p.m. in New York, on track to end the longest streak of gains since July. The Dow Jones Industrial Average rose 1.5 points, or less than 0.1%, to 15,328.10. Trading in S&P 500 stocks was 4.5% above the 30-day average at this time of day.
“It shouldn’t be too surprising to see a modest pullback after the strong moves we’ve seen so far this month,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. “With data light over the next several sessions, potential headlines regarding Syria and the much anticipated FOMC meeting next week will garner much of the attention.”
The S&P 500 rallied 3.4% in September through yesterday, rebounding from the worst monthly loss since May 2012, as reports showed China’s economy has strengthened, while concern abated that the U.S. will soon bomb Syria.
U.S. Secretary of State John Kerry told top Syrian opposition figures in a phone call that the option of a U.S. military strike remains on the table, according to a State Department official. Kerry arrived in Geneva today for talks with his Russian counterpart on a proposal for Syria to surrender its chemical weapons.
Syrian President Bashar al-Assad set conditions for the U.S., saying a deal must be a “two-way street” in which the Obama administration drops its military threats and stops arming Syrian rebels.
Investors have been scrutinizing economic data to determine whether growth is robust enough for the Fed to pare back its record stimulus following its Sept. 17-18 meeting.
A report today showed jobless claims in the U.S. declined last week to the lowest level since April 2006 as upgrades to computer systems in two states caused those employment agencies to report fewer applications.
“We’re going to ignore the report given the Labor Day holiday and this computer problem which calls into question the efficacy of the data,” said Phil Orlando, New York-based chief equity strategist at Federated Investors, which manages about $380 billion in assets.
Economists estimate the Fed this month will taper its monthly bond buying by $10 billion, to $75 billion, according to the median of 34 responses in a Bloomberg News survey. The stimulus has helped the S&P 500 rally as much as 153% since the beginning of the bull market in March 2009.
Speculation about stimulus reductions has whipsawed stocks since May, when Fed officials first indicated cuts could start this year. The S&P 500 tumbled 5.8% from a record on May 21 through June 24. It rebounded 8.7% to close at its latest all-time high of 1,709.67 on Aug. 2. The gauge then slumped as much as 4.6% before the seven-day rally through yesterday brought it back to within 1.2% of the record and above the May 21 peak.
“The Fed has a golden opportunity next week to really provide the market needed visibility on the taper program,” Jim Russell, the senior equity strategist for U.S. Bank Wealth Management, said in an interview from Cincinnati. His firm oversees $112 billion. “Next week is going to be crucial for the markets.”
The CBOE Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 2.5% to 14.16. The equity volatility gauge has tumbled 17% in September after rallying 26% in August, the biggest monthly gain since May 2012. The index moves in the opposite direction to the S&P 500 about 80% of the time.
Gauges of materials producers and financial companies fell the most among the 10 main industry groups in the S&P 500.
JPMorgan Chase & Co. slid 1.8% to $52.33 for the worst performance in the Dow. The bank may settle regulators’ probes into the bank’s credit-card debt collection practices and sales of identity-theft products as early as next week, according to two people with knowledge of the matter.
Silver dropped the most in 11 weeks and gold fell to a four-week low as a report showed euro-area industrial output contracted more than analysts estimated in July. Copper declined to a one-month low.
Barrick Gold, the largest miner of the metal, slipped 4.7% to $17.77 as gold dropped 2.6% for the biggest slide since July 5. Newmont decreased 3.5% to $28.42.
Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, slumped 5.4% to $22.36 for the biggest drop in the benchmark index for American equities.
Lululemon retreated 4.4% to $65.98. The yogawear retailer searching for a new chief executive officer cut its profit forecast as new rivals enter its market and shoppers cut spending on clothing. Earnings per share will be as much as $1.97, down from a previous projection of a maximum of $2.01, the Vancouver-based company said. The average of 29 analysts’ estimates compiled by Bloomberg was $1.99.
Disney jumped 3.2% to $65.97, the most in the Dow. The world’s biggest entertainment company plans to start the repurchase plan next year. The company will borrow to finance some of the buys, Chief Financial Officer Jay Rasulo said.
Pandora Media surged 12% to $24.05, headed for a record close. The biggest online radio service hired McAndrews in a push to lift revenue while fending off competition from Apple Inc. The executive was also named chairman and president, succeeding Joe Kennedy.
Phone stocks rallied the most in the S&P 500, adding 1.1%. AT&T Inc. jumped 1.3% to $34.40 and Verizon Communications Inc. rose 1.8% to $47.35 to pace gains among Dow companies.
Verizon produced a profit for investors of about $2.09 billion for agreeing to buy the record $49 billion of bonds it sold yesterday as the price of the securities surged. The debt sale topped Apple Inc.’s $17 billion offering in April and will help pay for the company’s planned $130 billion purchase of Vodafone Group Plc’s stake in Verizon Wireless.
Vertex Pharmaceuticals Inc., a developer of small-molecule pharmaceuticals, rose 2% to $81.41, and Ametek Inc., a manufacturer of electronic instruments, added 2.6% to $45.57. S&P Dow Jones Indices said the two companies will join the S&P 500, replacing Advanced Micro Devices Inc. and SAIC Inc.
AMD dropped 1.8% to $3.75 and SAIC added 1.2% to $14.95.
Stocks will continue to rally as the bull market in equities moves into a new phase driven by earnings growth rather than expanding valuations, according to strategists at Goldman Sachs Group Inc.
Equities will produce more moderate returns with lower volatility in the second phase of the bull market, according to Peter Oppenheimer, Goldman’s chief global equity strategist, who reiterated his bullish stance on stocks. Oppenheimer said in a March 2012 report that the prospects for returns from equities versus bonds “are as good as they have been in a generation.”