U.S. stocks fluctuated, after the Standard & Poor’s 500 Index came within four points of a record, as investors assessed the effects of the budget standoff and International Business Machines Corp. and Goldman Sachs Group Inc. tumbled amid declining revenues.
IBM, the world’s biggest computer-services provider, sank 5.6% after posting its sixth consecutive drop in quarterly sales. Goldman Sachs dropped 2.8% as the bank reported a 20% drop in revenue. EBay Inc. retreated 5.3% after the operator of the largest online marketplace issued sales and profit forecasts that missed analyst estimates. Newmont Mining Corp., the second-largest gold miner, jumped 3.3% as the price of the precious metal rallied.
The S&P 500 retreated less than 0.1% to 1,720.89 at 10:35 a.m. in New York after closing yesterday 0.3% from its record of 1,725.52. The Dow Jones Industrial Average declined 76.10 points, or 0.5%, to 15,297.76. IBM and Goldman, the second and third most heavily weighted stocks in the Dow, contributed about 90 points to the index’s retreat. Trading in S&P 500 stocks was 14% above the 30-day average at this time of day.
“A return to earnings and fundamental factors is the focus at this point,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone.
The benchmark equity gauge rallied 2.4% during the 16-day government shutdown that ended yesterday after President Barack Obama signed a bill to fund the government through Jan. 15 and extend the borrowing authority through Feb. 7.
Investors will now focus on the extent of the budget impasse’s impact on economic growth and whether the Federal Reserve will delay plans for reducing unprecedented monetary stimulus.
S&P Ratings Services yesterday said the shutdown has shaved at least 0.6% off of fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy. IHS Inc. of Lexington, Massachusetts, reduced its fourth-quarter GDP growth estimate to 1.6%, from 2.2% in September.
A report today showed that more Americans than forecast filed applications for unemployment benefits last week. California continued to work through a backlog, indicating it will take time to gauge the impact of the federal shutdown.
The Fed Bank of Philadelphia’s general economic index fell to 19.8 this month from 22.3 in September. Readings greater than zero signal growth in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.
Disruptions to the economy prompted speculation the Fed would maintain the pace of its $85 billion in monthly bond purchases. BlackRock Inc. and Pacific Investment Management Co. say the Fed will postpone tapering as a result of the debt- ceiling debate.
“Because of the disruption, because of the uncertainty, what’s likely to happen is a slower pace of tapering,” Russ Koesterich, the chief investment strategist at BlackRock in New York, said in an interview on Bloomberg Television. BlackRock is the world’s largest money manager with $4.1 trillion of assets.
The Fed “may now have no choice but to stay longer in its intense policy experimental mode –- due both to the likelihood of weaker data and to a perceived need to take out insurance for the economy against future political dysfunction,” said Pimco Chief Executive Officer Mohamed El-Erian in a CNBC blog posting.
The Fed stimulus has helped propel the S&P 500 up by more than 150% from its March 2009 low. The gauge has rallied 20% this year and closed at an all-time high on Sept. 18 after the Fed unexpectedly delayed reducing the pace of stimulus at its last policy meeting. The central bank next convenes Oct. 29-30.
The rally in stocks this year has pushed valuations to a three-year high and is the broadest since at least 1990. The S&P 500 trades at 16.5 times reported operating profit, a 17% increase from the beginning of 2013, according to data compiled by Bloomberg. Some 446 stocks in the gauge have posted year-to- date gains through yesterday, data show. The second-broadest rally in the period was in 1995, when 434 stocks in the benchmark gained through Oct. 16.
Companies from Knoll Inc. to NCI Inc. have said they expect the shutdown to affect fourth-quarter revenue. Knoll, an officer furniture maker, estimates about $10 million of government business to be pushed into next year, Chief Executive Officer Andrew Cogan told analysts yesterday on a conference call.
Stanley Black & Decker Inc.’s shares yesterday dropped 14%, the most since 1992, after the toolmaker reduced its full-year profit forecast in part because of the shutdown. Campbell Soup Co. has seen consumers pull back after a year that included higher payroll taxes, along with the impasse in Washington, Chief Executive Officer Denise Morrison said at Fortune magazine’s Most Powerful Women Summit in Washington.
Some 24 companies in the S&P 500 report results today, including Google Inc. Profits for companies in the gauge probably increased 1.4% during the third quarter as sales rose 2%, according to analysts’ estimates compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, sank 10%, extending a two-day slide to 29%. The gauge has retreated 27% this year.
IBM plunged 5.6% to $176.31 after third-quarter revenue fell 4% to $23.7 billion, $1 billion less than analysts had forecast in a Bloomberg survey.
Goldman Sachs fell 2.8% to $157.73. The world’s most profitable securities firm before the financial crisis said earnings were little changed as the bank cut costs in response to a 20% drop in revenue. The firm increased its dividend 10%.
EBay slipped 5.3% to $50.70 after saying fourth- quarter sales will be $4.5 billion to $4.6 billion amid “dramatically decelerating U.S. e-commerce growth.” Analysts on average were projecting revenue of $4.64 billion, according to data compiled by Bloomberg. EBay forecast profit excluding some items of 79 cents to 81 cents a share for the period, below analysts’ prediction of 83 cents.
American Express Co. rallied 3.9%, the most in nearly two years, to a record $79.33. The credit-card lender reported a third-quarter profit that beat analysts’ estimates.
Newmont Mining jumped 3.3% to $26.73. Gold rallied 2.5% on speculation the Federal Reserve will postpone slowing stimulus. The metal is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on earlier speculation the Fed would slow debt purchases this year.
Peabody Energy Corp. surged 8.4% to $19.38 for the biggest gain in the S&P 500. The largest U.S. coal producer posted a surprise third-quarter profit after a recovery in domestic prices for coal used to generate electricity and a reduction in mining costs.
SanDisk Corp. climbed 6% to $66.74 after posting third-quarter adjusted earnings of $1.59 a share, exceeding the $1.33 median forecast of analysts surveyed by Bloomberg. The company reported sales of $1.63 billion, compared with the $1.56 billion projected by analysts.
Verizon Communications Inc. increased 3.2% to $48.77 as the second-largest U.S. phone company reported profit that exceeded projections.