U.S. stocks drop as improving economy, earnings fuel taper bets

U.S. stocks fell, with the Dow Jones Industrial Average retreating from a record, as corporate earnings and an improving economy fueled speculation the Federal Reserve will reduce stimulus next month.

NRG Energy Inc. slipped 4.2% after the power generator lowered its 2013 adjusted earnings target. News Corp. dropped 1.2% as the publisher of the Wall Street Journal reported a decline in revenue. Dish Network Corp. rose 5.1% as the second-largest U.S. satellite-television provider’s earnings exceeded estimates.

The Standard & Poor’s 500 Index fell 0.5% to 1,762.88 at 1:40 p.m. in New York after closing within a point of its all-time high. The Dow lost 74.56 points, or 0.5%, to 15,708.54. Trading volume was 5.9% below the 30-day average at this time of day.

“The jobs report Friday that’s really what changed the idea that we could have a December taper, and ever since then you’ve had more and more comments coming out of the Fed that perhaps it is on the table,” James Paulsen, the Minneapolis- based chief investment strategist at Wells Capital Management, which oversees about $340 billion, said in a phone interview. “Last night it was Fisher and now Lockhart. What he came out and said today isn’t earth-shattering but it does add to the momentum to the idea.”

The S&P 500 and the Dow Jones Industrial Average have touched records this quarter as the Fed refrained from curbing its $85 billion in monthly asset purchases, while better-than- forecast data and corporate earnings indicate the economy may be strong enough to withstand less stimulus.

Taper Debate

“Some discussion of tapering could well take place” next month, Fed Bank of Atlanta President Dennis Lockhart said today in a Bloomberg Radio interview with Kathleen Hays. Dallas Fed President Richard Fisher said in a speech in Melbourne today that monetary accommodation “becomes riskier by the day.”

Economists forecast the Fed will delay tapering asset purchases until the March 18-19 meeting. Policy makers will probably pare the monthly pace of bond buying to $70 billion at that time, according to the median of 32 estimates in a Bloomberg survey Nov. 8. The group next meets Dec. 17-18.

Investors will scrutinize economic reports this week on jobless-benefit claims and manufacturing in the New York area. Data last week showed the U.S. economy grew faster than forecast in the third quarter and hiring rose more than estimated in October. There was no data yesterday and the U.S. Treasury markets were closed for the Veterans Day holiday.

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