U.S. stocks decline as economic data fuel Fed stimulus speculation

U.S. stocks declined a fifth day after improving economic data boosted bets the Federal Reserve will curb its monthly bond purchases sooner than estimated.

Microsoft Corp. fell 2.7% after comments from a Ford Motor Co. director indicated Chief Executive Officer Alan Mulally would not take over Microsoft’s top job. Safeway Inc. slid 4% after Jana Partners LLC cut its stake in the supermarket chain. J.C. Penney Co. lost 9.4% after hedge fund manager J. Kyle Bass said he sold his stake in the struggling retailer.

The Standard & Poor’s 500 Index fell 0.5% to 1,783.50 at 3:01 p.m. in New York. The gauge has retreated 1.3% in the past five sessions for its longest slump since September. The Dow Jones Industrial Average dropped 73.60 points, or 0.5%, to 15,816.17. Trading in S&P 500 stocks was 2.9% above the 30-day average at this time of day.

“The numbers today pave the way for the Fed” to cut stimulus, Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. “There’s angst in the short run, but I think it’s only positive in the long run that the Fed begin to taper and extricate itself from being the ultimate market maker.”

The S&P 500 has surged 25% this year, poised for the biggest annual gain in a decade, as the Fed refrained from reducing its monthly bond purchases and corporate earnings surpassed estimates. The central bank has said it will start slowing the pace of stimulus if the economy improves in line with its forecasts.

GDP Growth

The U.S. economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. Gross domestic product climbed at a 3.6% annualized rate, up from an initial estimate of 2.8% and the strongest since the first quarter of 2012.

A separate report showed applications for U.S. employment benefits decreased to 298,000 in the week ended Nov. 30. The median forecast of 41 economists surveyed by Bloomberg called for an increase to 320,000.

The S&P 500 fluctuated yesterday before closing lower by 0.1%, as better-than-forecast payroll data that fueled tapering concerns outweighed optimism that lawmakers in Washington were close to a budget deal. Data tomorrow may show the unemployment rate fell to 7.2%, matching the lowest level since 2008.

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