U.S. stocks decline before employment data amid earnings reports

U.S. stocks declined, after the Standard & Poor’s 500 Index rallied to a record, as investors awaited tomorrow’s employment data to assess the strength of the economy and watched corporate earning reports.

Homebuilders slumped 2.1% as a group amid a report showing existing-home sales declined for the first time in three months. Halliburton Co. dropped 2.9% as revenue fell short of forecasts. Apple Inc. rose 2.5% as Chief Executive Officer Tim Cook will likely introduce a high- definition iPad mini and thinner iPad tomorrow. General Electric Co. gained 2.5% to the highest level since 2008. VF Corp. and Hasbro Inc. climbed at least 3.3% on better-than- estimated earnings.

The S&P 500 lost 0.1% to 1,742.29 at 2:49 p.m. in New York. The Dow Jones Industrial Average fell 15.13 points, or 0.1%, to 15,384.52. Trading in S&P 500 stocks was 4.4% below the 30-day average during this time of day.

“People do want to lighten up a bit in front of” tomorrow’s jobs report, Matt Maley, an equity strategist with Miller Tabak + Co. said in an interview from Boston. The market “is pretty extended, so it would actually be healthy if we took a breather before it tried to move higher from current levels.”

The S&P 500 had its best weekly gain since July last week as results from Google Inc. topped estimates and speculation grew that the Federal Reserve will delay cutting monetary stimulus. The index has gained 3.6% so far in October as Congress agreed on a new federal budget that avoided a default and ended the first partial government shutdown in 17 years.

New Highs

The benchmark measure has advanced 22% this year as Fed Chairman Ben S. Bernanke refrained from reducing $85 billion of monthly bond purchases to stimulate the economy.

The Labor Department will tomorrow release the September jobs report, which was delayed from its original Oct. 4 date because of the 16-day partial federal shutdown that ended Oct. 17. The data will probably show employers added 180,000 workers in September, the most since April, after a 169,000 gain in August, according to the median estimate of 93 economists surveyed by Bloomberg.

Money has been flowing in and out of financial markets more rapidly than ever before this year, a bullish signal as the threat of a U.S. sovereign default fades.

Since Sept. 1, about $47 billion has gone to exchange- traded funds that track everything from stocks to bonds to commodities, according to data compiled by Bloomberg. That followed $18 billion pulled in August, $40 billion added in July and $11 billion pulled in June, making it the most volatile period on record for flows. Almost $7 billion went to ETFs on Oct. 17 alone.

Earnings Forecasts

Analysts have raised their forecasts for profits and now forecast an average increase of 2.5% for all companies in the S&P 500, according to estimates compiled by Bloomberg. That compares with an expected gain of 1.7% at the beginning of the month.

Earnings at the 106 companies that have reported so far grew 4.5%, while sales gained 2%. Some 71% of the companies have topped analysts’ profit estimates, while 54% have beaten on sales.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, climbed 2.2% today to 13.32, following three days of declines. The measure has fallen 20% this month.

Seven out of 10 S&P 500 main industries retreated as health-care, utility and consumer-staples shares fell more than 0.4% for the worst performance. Telephone and technology stocks rose at least 0.4%.

An S&P index of homebuilders slipped 2.1% as all its 11 members dropped. Purchases of previously owned homes fell 1.9% to a 5.29 million annual rate in September, retreating from an almost four-year high as rising prices and mortgage rates discouraged would-be buyers, a report from the National Association of Realtors showed.

D.R. Horton Inc. declined 1.9% to $18.66 while Lennar Corp. lost 1.1% to $34.66.

Halliburton slid 2.9% to $50.97. The world’s largest provider of hydraulic-fracturing services reported third-quarter revenue that missed forecasts. Excluding one-time items, earnings beat analysts’ estimates.

Gannett Co. declined 3.8% to $26.46. The publisher of USA Today and owner of U.S. television stations reported third-quarter sales that trailed analysts’ estimates. Television advertising revenue in the fourth quarter will decline in a percentage of “high teens,” the company said.

Upgrading Lineup

Goodyear Tire & Rubber Co. tumbled 7% to $21.05. The biggest U.S. tiremaker was cut to hold from buy at Deutsche Bank AG on concern the company’s profit margins may have peaked. Separately, Goodyear said it hasn’t received any new offer for its Amiens Nord plant in France.

Apple climbed 2.5% to $521.62. The stock is up nine straight days, the longest stretch since October 2010. The company is upgrading its iPad lineup to fend off a growing list of competitors, which are introducing their own tablets at lower prices with snazzier features.

Cook, facing two straight quarters of declining profit and a stock that’s down by more than a quarter from a September 2012 record, will introduce the new models at a San Francisco event tomorrow, people with knowledge of the plans have said.

GE rallied 2.5% to $26.19, the highest level since September 2008. The company has climbed 8.3% over four days, the biggest gain for that time span since December 2011. The maker of jet engines, power generation equipment and locomotives was added to Citigroup Inc.’s U.S. focus list. The company last week assured investors that its industrial business is poised to meet a goal for profit-margin growth.

Dividend Increase

VF gained 3.3% to $211.10. The world’s largest apparel maker increased its quarterly dividend to $1.05 a share from 87 cents as profit exceeded analysts’ estimates. The company announced a 4-for-1 stock split.

Hasbro jumped 4.6% to $49.41. The world’s second- biggest toymaker reported third-quarter earnings and sales that topped analysts’ estimates.

AT&T Inc., the largest U.S. phone company, advanced 1.4% to $35.10. The company announced yesterday it has agreed to sell or lease 9,700 wireless towers with Crown Castle International Corp. for $4.85 billion, giving it extra cash as it considers a European expansion. The agreement makes AT&T the latest carrier to offload towers to independent operators.

www.bloomberg.com

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