U.S. stocks react to slide in consumer spending

U.S. stocks fell, after the benchmark Standard & Poor’s 500 Index rose to a record, as a report showed an unexpected decline in consumer spending last month.

Lions Gate Entertainment Corp. dropped 11 percent after quarterly results missed estimates. Express Inc. fell 13 percent as the retail chain cut its annual profit forecast. Infoblox Inc. sank 39 percent after lowering its full-year projections and saying its chief executive officer will leave. OmniVision Technologies Inc. jumped 12 percent after predicting quarterly earnings will rise more than analysts expect.

The S&P 500 slipped 0.1 percent to 1,918.36 at 9:57 a.m. in New York. The Dow Jones Industrial Average lost 39.17 points, or 0.2 percent, to 16,659.57. Trading in S&P 500 stocks was 30 percent below the 30-day average during this time of day.

“The consumer is still conservative and cautious,” Sam Wardwell, an investment strategist at Pioneer Investments in Boston, said in a phone interview. His firm manages about $249 billion globally. “The outlook for the market for the rest of the year remains constructive. It’s not so much we don’t have a belief where the market is going, we just don’t know what route it’s going to take to get there.”

Monthly Gain

The S&P 500 yesterday climbed to its highest level on record, taking its 2014 gains to 3.9 percent and shrugging off a report showing the U.S. economy contracted for the first time in three years from January through March. The gauge has rebounded 5.8 percent since a selloff in small-cap and Internet shares spread to the broader market and dragged the gauge to a two- month low in April. It has advanced 1.9 percent in May, heading for its fourth consecutive monthly increase.

Consumer spending unexpectedly fell in April after the biggest surge in almost five years as incomes slowed. Household purchases, which account for about 70 percent of the economy, dropped 0.1 percent, the first decrease in a year, after a revised 1 percent gain the prior month that was the strongest reading since August 2009, Commerce Department figures showed.

Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll. Central-bank stimulus has helped propel the S&P 500 higher by 184 percent from its bear-market low in March 2009. The gauge now trades at 16.3 times the projected earnings of its members, up from a multiple of 14.8 times four months ago.

Consumer Confidence

Consumer confidence in the world’s largest economy fell less than initially estimated. The Thomson Reuters/University of Michigan sentiment index slipped in May to 81.9 from 84.1, which was its highest level in nine months. A preliminary report two weeks ago signaled a drop in confidence to 81.8.

Business activity in the Chicago area expanded in May for a thirteenth straight month. The Institute for Supply Management- Chicago Inc.’s business barometer rose to 65.5 in May from 63 a month earlier, according to a report today. A reading above than 50 signals expansion.

Lions Gate, the studio behind “The Hunger Games” movies, slipped 11 percent to $26.43. Revenue fell 8.1 percent to $721.9 million for the quarter through March 31, the company said yesterday. Analysts had predicted $823.7 million on average. Adjusted earnings per share were 42 cents, also missing the 43- cent average estimate.

Express Results

Express lost 13 percent to $11.92. The company predicted earnings of 74 cents to 90 cents a share this year, down from a previous forecast of as much as $1.23. First-quarter profit fell to 6 cents a share, missing estimates. The shares have dropped 27 percent in 2014.

Infoblox Inc. sank 39 percent to $12.54. CEO Robert Thomas will leave after almost a decade at the network and data- services provider, according to a statement yesterday. Profit for the 12 months ending July 31 will be as much as 32 cents per share, down from a previous forecast for as much as 34 cents. Sales will probably not exceed $246 million, less than the $252.6 million average analyst estimate.

OmniVision, a maker of image sensors used in mobile phones and security cameras, jumped 12 percent to $22.49. Earnings for the quarter through July may rise to as high as 63 cents a share, more than double the average analyst estimate of 29 cents. Adjusted EPS came at 40 cents for the quarter ended April 30, according to a statement.

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