U.S. stocks were little changed, after the first drop in five days for the Standard & Poor’s 500 Index (CME:SPZ13), as investors assessed corporate earnings and speculated on when the Federal Reserve will cut stimulus.
Facebook Inc. and Exxon Mobil Corp. jumped more than 1.3% after earnings topped estimates. Boeing Co. advanced 1% after saying it would step-up production of its 737 jets. Visa Inc. lost 2.9% as the bank-card network said revenue rose less than projected. Avon Products Inc. fell 24% after saying possible fines related to foreign bribery probes may hurt earnings.
The S&P 500 rose less than 0.1% to 1,763.92 at 3:18 p.m. in New York, after fluctuating between gains and losses during the day. The Dow Jones Industrial Average slipped 4.27 points, or less than 0.1%, to 15,614.49. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.
“We don’t expect anything really before the March time frame,” David Roda, the Miami-based regional chief investment officer for Wells Fargo Private Bank, said in a phone interview, referring to the possibility of a tapering of Fed stimulus. His firm manages $170 billion. “Even though the jobs data is slowly improving, the pace of improvement has slowed and the quality of job growth is certainly not that great.”
The S&P 500 fell 0.5% from a record yesterday, halting four days of gains, as the Fed fueled bets it may begin to cut stimulus in the coming months. The central bank maintained $85 billion in monthly bond purchases, saying that while the economy shows signs of “underlying strength” it needs to see more evidence of sustainable improvement.
Economists at Citigroup Inc. and Barclays Plc said yesterday’s Fed policy statement opens the possibility of reduced bond purchases as soon as December. The odds of a taper in January rose to 45%, from 25% before the decision, according to Citigroup. Economists surveyed by Bloomberg Oct. 17-18 had predicted the Fed would begin paring stimulus in March.
Fed stimulus has helped propel the S&P 500 higher by more than 160% from a 12-year low in 2009. The gauge has surged 4.9% in October, heading for the biggest monthly gain since July, as lawmakers ended a 16-day government shutdown and agreed to extend the U.S. borrowing authority, avoiding a possible debt default.
Stocks slumped earlier today after a report showed business activity in the U.S. expanded in October as orders and production surged. The MNI Chicago Report business barometer jumped to 65.9 from 55.7 in September, the biggest monthly increase in more than three decades. Readings above 50 signal expansion.
Separate data showed fewer Americans filed applications for unemployment benefits last week as a backlog in California’s reporting cleared.
The Chicago Board Options Exchange Volatility Index, the gauge known as VIX that measures options traders’ estimate of future price swings in the S&P 500, rose 0.7% to 13.74. The gauge has lost 17% this month.
The S&P 500 is trading at 15.9 times its companies’ estimated earnings, the highest valuation since the start of 2010, according to data compiled by Bloomberg.
Two of America’s best known investors are moving in opposite directions in the stock market, with Laszlo Birinyi predicting more gains as David Einhorn takes a more cautious approach.
“As the market continued its relentless climb, we’ve become more conservatively positioned,” hedge-fund manager Einhorn said today on a conference call.
Long positions, which gain on rising asset prices, exceeded short bets by 35 percentage points as of Sept. 30 at Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where Einhorn oversees investments and serves as chairman. That’s down from about 42 percentage points three months earlier, said Einhorn, who gained fame for betting on a decline in Lehman Brothers Holdings Inc. stock before it collapsed in 2008.
Birinyi, president of Birinyi Associates Inc., raised his forecast for the S&P 500, predicting a 3.2% advance to 1,820 in the next three months.
Birinyi, one of the first money managers to advise clients to buy in 2009, said he purchased calls on an exchange-traded fund tracking the S&P 500, according to a report today. His previous forecast for the U.S. equity benchmark, set Sept. 25, was 1,760.
Exxon, MasterCard and American International Group Inc. are among 34 companies in the S&P 500 reporting results today. Of the 356 companies that have reported results this season, 76% exceeded analysts’ predictions for profit, while 53% beat sales estimates, data compiled by Bloomberg showed.
Profits for members of the gauge probably increased 3.7% in the third quarter as sales climbed 2.4%, according to analysts’ estimates compiled by Bloomberg. Analysts project earnings will rise 7.5% in the final quarter, and 8.3% in the first three months of 2014.
“Once they do start tapering, the market will start trading more on fundamentals, and fundamentals look fairly resilient,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in a phone interview today. His firm oversees $400 billion.
Exxon rose 1.7% to $90.34 for the biggest gain in the Dow. The largest oil company by market value lifted production for the first time in more than two years and reported third-quarter profit that beat analyst estimates.
Facebook advanced 1.3% to $49.66, reversing a decline of as much as 5.1%, after the operator of the world’s largest social network yesterday reported third-quarter profit that beat analyst estimates.
The shares slid earlier after Facebook said younger teens aren’t using its website as much as they used to and it will limit its news feed advertisements that have driven revenue gains.
Pivotal Research Group LLC upgraded the shares to buy from hold, saying Facebook retains its advantage in ad sales and the negative reaction to comments about lower teen use was overdone.
Boeing gained 1% to $130.98. The world’s largest plane-maker plans to speed the monthly production tempo of its best-selling 737 jets by 24% to 47 a month by 2017, the highest rate ever.
Expedia Inc. rallied 19% to $59.28. Adjusted earnings were $1.43 per share in the third quarter, the online travel company said in a statement, more than the $1.36 predicted by analysts.
Visa lost 2.9% to $197.95 for the largest decline in the Dow. Fourth-quarter net operating revenue rose 8.9% to $2.97 billion, missing the $3.02 billion average estimate of analysts in a Bloomberg survey.
Avon tumbled 24% to $17.06. The world’s largest door-to-door cosmetics seller posted a third-quarter net loss, while its profit excluding some items fell short of analyst estimates.
Avon and the government have investigated whether former employees in China and other countries bribed officials in violation of the Foreign Corrupt Practices Act. The Securities and Exchange Commission offered a settlement last month with monetary penalties that were “significantly greater” than the $12 million the company had offered, Avon said in a filing today.
Computer Sciences Corp. lost 4.7% to $49.20. The provider of technology consulting to governments and companies signaled that a probe by the SEC is escalating.
As part of an almost three-year investigation by the SEC, former U.S. executives, along with some current employees outside the country, have received Wells notices from the commission, CSC said today in a filing. The SEC sends a Wells notice to notify that investigators may recommend an enforcement action.
JDS Uniphase fell 9.9% to $13.29. The provider of network analytics for the telecommunications and broadband industries was cut to hold from buy at Jefferies by equity analyst James Kisner after forecasting sales below analyst estimates for this quarter.