By Alex Barinka & Katie Brennan - Aug 15, 2013 8:10 AM PT
Employees work on a Jeep Cherokee in the body shop at the Chrysler Group LLC Toledo Assembly Complex in Toledo, Ohio. Photographer: Jeff Kowalsky/Bloomberg
A treader works on the floor of the New York Stock Exchange on Aug. 13, 2013. Photographer: Richard Drew/AP Photo
U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest decline since June, as improving economic data fueled speculation the Federal Reserve will reduce stimulus this year and forecasts from Cisco (CSCO) Systems Inc. and Wal-Mart Stores Inc. disappointed.
All 10 major industries in the S&P 500 (SPX) retreated, with technology, financial and consumer-discretionary shares dropping more than 1.6 percent. Cisco and Wal-Mart lost at least 2.2 percent after reporting earnings.
Employees work on a Jeep Cherokee in the body shop at the Chrysler Group LLC Toledo Assembly Complex in Toledo, Ohio. Photographer: Jeff Kowalsky/Bloomberg
Aug. 15 (Bloomberg) -- Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds, talks about the equity market and investment strategy. He speaks with Betty Liu, Alix Steel and Olivia Sterns on Bloomberg Television's "In the Loop." (Source: Bloomberg)
A treader works on the floor of the New York Stock Exchange on Aug. 13, 2013. Photographer: Richard Drew/AP Photo
The S&P 500 slipped 1.4 percent to 1,662.42, the lowest since July 11, at 11:07 a.m. in New York. The benchmark index has retreated 2.8 percent since closing at an all-time high on Aug. 2. The Dow Jones Industrial Average dropped 206.47 points, or 1.4 percent, to 15,131.19 today, with all 30 of its members falling. Trading in S&P 500 stocks was 23 percent higher than the 30-day average at this time of day. Treasury yields rose to the highest levels in two years.
“These data provide a reasonable assessment that a fall time period for taper is something the market should consider,”Stephen Wood, the New York-based chief market strategist who helps oversee about $237 billion at Russell Investments, said by phone. “Inflation has been coming in uncomfortably on the low side. Critical to this environment is inflation expectations.”
The consumer-price index increased 0.2 percent after a 0.5 percent gain in June, Labor Department figures showed. The advance matched the median forecast of 82 economists surveyed by Bloomberg. The core measure, which excludes food and fuel, also climbed 0.2 percent from June.
Inflation Watch
Central bank policy makers have said they will watch inflation figures closely to ensure the U.S. doesn’t slip into a prolonged period of diminishing increases, or disinflation, that would damage the recovery.
Fed Bank of St. Louis President James Bullard, who has backed the Fed’s monthly bond purchases, the stimulus program known as quantitative easing, said the current low pace of inflation wouldn’t ordinarily prompt the central bank to curtail stimulus.
“The committee would not normally remove policy accommodation in an environment where inflation is below target and is projected to remain there,” said Bullard, who votes on policy this year, in prepared remarks in Louisville, Kentucky. The Fed’s inflation goal is 2 percent.
The number of applications for unemployment insurance payments declined by 15,000 to 320,000 in the week ended Aug. 10, the fewest since October 2007, from a revised 335,000, a Labor Department report showed today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 335,000.
Manufacturing Reports
Industrial production in the U.S. was unchanged in July. Separate reports showed manufacturing in the Philadelphia region expanded in August for the third straight month, while it grew at a slower-than-anticipated pace in the New York area.
Central-bank stimulus helped propel the S&P 500 up more than 150 percent from its low in 2009. The Fed, led by Chairman Ben S. Bernanke, will probably reduce its $85 billion in monthly bond purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction at next month’s meeting. The first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, the survey showed.
‘Positive Data’
“We could still be in an environment where the market is having difficulty digesting some positive data points because of the possible end result of tapering happening sooner or more forcefully than we would like,” Kristina Hooper, U.S. head of investment and client strategies at Allianz Global Investors, said in an interview from Frankfurt. Her firm oversees more $409 billion.
The Chicago Board Options Exchange Volatility Index, or VIX, climbing 11 percent today, the largest advance since June 24, to 14.44. The equity volatility gauge has jumped 22 percent since Aug. 5.
Wal-Mart, the world’s largest retailer, fell 2.2 percent to $74.72. The Bentonville, Arkansas-based company trimmed its adjusted earnings forecast for the year ending January 2014 to as little as $5.10 a share, after predicting in May profit of at least $5.20.
Cisco Slumps
Cisco sank 7.3 percent to $24.45 as the world’s biggest maker of networking equipment said revenue for the current quarter through October will be $12.2 billion to $12.5 billion. Analysts on average had projected sales of $12.5 billion.
The company is eliminating 4,000 jobs amid weaker sales in Japan, China and Europe, Chief Executive Officer John Chambers said on a conference call yesterday.|
“The second half of the year is supposed to be so great, but then Wal-Mart’s earnings are lackluster and so limp, and Cisco is saying things are not as great as they were last quarter,” Chad Morganlander, a Florham Park, New Jersey-based money manager who helps oversee about $130 billion at Stifel Nicolaus & Co., said in a telephone interview. “This is a reminder that although economic deceleration has abated, earnings for corporations across the globe are hard to come by.”
Of the 460 companies in the benchmark index that have reported quarterly results this period, 72 percent have exceeded analysts’ profit estimates, data compiled by Bloomberg show. Some 55 percent have topped forecasts for revenue.
NetApp, Onyx
NetApp Inc. (NTAP) retreated 1.2 percent to $41.81. The data-storage company predicted earnings in the second quarter will be 60 cents a share to 65 cents. That compared with theaverage analyst estimate of 63 cents.
Onyx Pharmaceuticals Inc. declined 5.8 percent to $117.01. Talks over Amgen Inc.’s proposed takeover of the maker of blood-cancer medication have stalled over a dispute about access to data from an ongoing drug trial even as the two sides have a general agreement on price, said three people familiar with the matter.
“Amgen does not comment on market rumors,” said Christine Regan, a spokeswoman for theThousand Oaks, California-based company. Lori Melancon, a spokeswoman for Onyx, declined to comment on the report of the talks.
Hewlett-Packard Co. retreated 2.7 percent to $26.44. Rival Lenovo Group Ltd. reported first-quarter profit that beat analyst estimates after increasing its global market share for tablet computers, smartphones and PCs.
To contact the reporters on this story: Alex Barinka in New York at abarinka2@bloomberg.net; Katie Brennan in New York at kbrennan23@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
