U.S. stocks fell after the Standard & Poor’s 500 Index (CME:SPU13) rallied to a record yesterday on the Federal Reserve’s decision to refrain from cutting stimulus as investors weighed the latest batch of economic reports.
ConAgra Foods Inc. lost 3.7% after first-quarter sales missed analyst estimates. Walt Disney Co. dropped 2.3% as Morgan Stanley downgraded the shares. Apple Inc. jumped 2.2% to pace advances among technology shares. Agilent Technologies Inc. added 4.8% as the provider of bio-analytical and electronic measurement services said it will split into two public companies. Rite Aid Corp. surged 20% as the drugstore chain raised its profit forecast.
The S&P 500 fell 0.2% to 1,722.73 at 1:22 p.m. in New York. The Dow Jones Industrial Average lost 34.02 points, or 0.2%, to 15,642.92. Trading in S&P 500 stocks was 25% above the 30-day average at this time of day.
“People know the Fed at some point has to start a tapering process,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said by telephone. “Longer term, there’s also an indication of a little lack of confidence from the Fed in terms of the economic growth. We’ll see what the market does this afternoon. Perhaps it will start to reflect on a little bit of the longer-term message.”
The benchmark index climbed 1.2% to a record yesterday as the Fed unexpectedly refrained from reducing bond buying. Treasury yields have jumped since May, when Fed Chairman Ben S. Bernanke first outlined a possible timetable for a reduction in asset purchases.
The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion- a-month bond-buying program, surprising economists who predicted a reduction in the plan. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record $3.66 trillion through three rounds of stimulus, helping send the S&P 500 155% higher since March 2009.
“To be fair to Bernanke, he set the conditions necessary for tapering and the conditions are not there,” Ross Yarrow, who sells U.S. equities to European investors for Robert W. Baird & Co. in London, said in a phone interview today. That’s “not because of any particular deterioration but because, by talking about tapering, he already achieved an adjustment in yields,” Yarrow said.
Ten-year U.S. Treasury yields climbed as high as 3.01% on Sept. 6 from 1.61% on May 1. They plunged 16 basis points yesterday to 2.69%.