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

Yellen Hearing

The market may get some insight into Fed thinking when Vice Chairman Janet Yellen testifies before the Senate Banking Committee Nov. 14 during her confirmation hearing to succeed Ben S. Bernanke as chairman.

The Fed support has helped propel the S&P 500 higher by more than 160% from its March 2009 low. The gauge has rallied 24% so far in 2013, poised for its best year in a decade, and is trading at 16 times projected earnings, more than the five-year average of 14 times earnings, according to data compiled by Bloomberg.

“A lot of U.S. financial firms will start to close their books for the year now after this decent performance,” said Ioan Smith, a market strategist at KCG Europe Ltd. In London. “If you’ve had good returns and you outperformed, how much more are you going to get this year? There is a big argument to lock in what gains you’ve got given the risk-reward is not conducive of any significant gains from these levels.”

Earnings Scorecard

Some 13 members of the S&P 500 report earnings today. Seventy-four% of the 450 companies that have released results so far have beaten analysts’ estimates, according to data compiled by Bloomberg.

“It was a good earnings season, it definitely helped the market,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said by phone. He helps oversee $1.9 billion.

The Chicago Board Options Exchange Volatility Index, which measures future volatility signaled by S&P 500 options, rose 3..6% to 12.98.

Eight of 10 main S&P 500 groups retreated, with utility and financial stocks sliding at least 0.8% to pace losses.

NRG fell 4.2 to $26.85 for the biggest slide in the S&P 500. The power generator lowered the upper end of its 2013 adjusted earnings range and cut its 2014 target.

Energy companies retreated 0.9% as a group. Cliffs Natural Resources Inc., an iron ore miner, fell 4.1% to $26.26. Peabody Energy Corp., a coal miner, slid 3.1% to $20.14.

Publishing, Cable

News Corp. slid 1.2% to $17.22 as the publisher reported a 2.8% decline in first-quarter revenue, hurt by shrinking demand for print advertising. The news division, which owns papers in the U.S., the U.K. and Australia, saw revenue fall 10% to $1.5 billion.

Liberty Global Plc, the European cable operator owned by John Malone, fell 2.1% to $77.78. The company is in talks to acquire Intel Corp.’s online pay-TV service under development, according to three people with knowledge of the situation. Malone would use Intel’s system outside the U.S., said one of the people, who asked not to be identified because the talks are private.

Dean Foods Co. fell 8% to $18.14 after the company lowered its full year earnings forecast. Dallas-based Dean said dairy commodity prices remain high, creating a more challenging environment than previously thought. The milk producer also said it will start paying a dividend of 7 cents in the first quarter.

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