U.S. Stocks Fall as Fisher Says Fed Closer to Tapering
<cite class="byline" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; font-size: 11px; vertical-align: baseline; background-color: transparent; width: 640px; color: rgb(111, 111, 111); display: block; font-style: normal; line-height: 1.3em; position: static !important; background-position: initial initial; background-repeat: initial initial;">By Sofia Horta e Costa & Nick Taborek - Aug 5, 2013 11:42 PM GMT+0800</cite>
U.S. stocks fell, after the Standard & Poor’s 500 Index climbed to a record high last week, as Federal Reserve Bank of Dallas President Richard Fisher said the central bank is closer to slowing its monthly bond buying.
Qualcomm Inc. (QCOM) dropped 1.3 percent as Piper Jaffray Cos. cut its rating on the company. Berkshire Hathaway Inc. (BRK/A) climbed 0.4 percent after posting second-quarter earnings that exceeded analysts’ projections. Tyson Foods Inc. rose 3.7 percent after reporting third-quarter results that beat estimates.
The S&P 500 (SPX) slipped 0.2 percent to 1,707.15 at 11:41 a.m. in New York. The Dow Jones Industrial Average lost 48.77 points, or 0.3 percent, to 15,609.59. Trading in S&P 500 stocks was 31 percent below the 30-day average during this time of day.
“The market has put on such a powerful move this year that regardless of the numbers that come out we’re due for some type of pullback, even if it’s brief in duration and mild in severity,”Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion.
Stocks rallied 1.1 percent last week, sending the S&P 500 above 1,700 for the first time, as central banks vowed to maintain stimulus and data showed economic growth beat projections in the second quarter. The S&P 500 has advanced 20 percent this year and is trading at 15.5 times estimated earnings, compared with an average of 13.9 over the last five years, datacompiled by Bloomberg showed.
Fed’s Fisher
The Fed’s Fisher, one of the most vocal critics of quantitative easing, warned investors not to rely on the central bank’s $85 billion in monthly bond purchases.
“Financial markets may have become too accustomed to what some have depicted as a Fed ‘put,’” or the idea that the central bank will loosen credit after a market decline, Fisher said in a speech in Portland, Oregon. “Some have come to expect the Fed to keep the markets levitating indefinitely. This distorts the pricing of financial assets” and can lead to “serious misallocation of capital.”
Central bank policy makers have been debating the pace and timing of any cuts in the monetary stimulus that has helped propel the S&P 500 up more than 150 percent from its bear-market low in 2009. The Fed said last week persistently low inflation could hamper the economy and pledged to keep buying bonds every month. Tapering of the pace of asset purchases may begin in September, according to a growing number of economists surveyed by Bloomberg from July 18 to July 22.
The Institute for Supply Management’s non-manufacturing index increased to 56 in July from 52.2 the prior month, a report from the Tempe, Arizona-based group showed today. The median forecast in a Bloomberg survey of economists called for a gain to 53.1. Readings higher than 50 indicate growth in the industries that make up almost 90 percent of the economy.
Earnings Scorecard
Better-than-expected corporate earnings have also bolstered stocks in recent weeks. Of the 391 companies in the S&P 500 that have reported results for the second quarter, 74 percent have surpassed forecasts, according to data compiled by Bloomberg. Analysts projected companies on the gauge will increase their third-quarter earnings per share by 3.3 percent from a year earlier, and their profit in the fourth quarter by 9.9 percent, according to estimates compiled by Bloomberg.
Seven out of 10 main industries in the S&P 500 fell today, with utility and energy shares losing at least 0.4 percent to lead declines.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, rose 1.1 percent today to 12.11. The equity volatility gauge reached its 2013 peak in June and has since fallen 41 percent.
Qualcomm Rating
Qualcomm dropped 1.3 percent to $65.86 today. Piper Jaffray cut its rating on the largest seller of semiconductors for mobile phones to neutral from overweight, meaning that investors should not buy more of the shares. The brokerage cited weaker demand for the parts used in the most expensive smartphones.
Fossil Group Inc. lost 4.8 percent to $108.85. The fashion accessories designer declined after an analyst with Barclays Plc downgraded the shares to underweight from equalweight.
Fastenal Co. fell 2 percent to $49.24 after saying daily sales growth slowed to 2.9 percent last month. Holding the July 4 public holiday on a Thursday contributed to weak sales on July 5, the seller of nuts and bolts said in a statement.
Berkshire Hathaway’s Class B shares rose 0.4 percent to $118.31. Net income climbed to $4.54 billion, or $2,763 a share, from $3.11 billion, or $1,882, a year earlier, the Omaha, Nebraska-based company said late on Aug. 2. Operating earnings, which exclude some investment results, were $2,384 per A share, beating the $2,166 average estimate of three analysts surveyed by Bloomberg.
Tyson jumped 3.7 percent to $29.56 for the biggest gain in the S&P 500. The largest U.S. beef producer reported record profit from its chicken unit and wider margins in the beef business.
Facebook Inc. rose 2.8 percent to $39.10 after a Piper Jaffray analyst raised his price target to $46 from $38. The operator of the world’s largest social network may gain revenue from video ads that is largely not included in consensus estimates, analyst Gene Munster wrote in a note to clients.
Facebook shares climbed above their initial public offering price of $38 last week for the first time since its debut trading day on May 18, 2012. The stock has surged 47 percent since the company said July 24 that mobile advertising revenue grew in the second quarter.
To contact the reporters on this story: Sofia Horta e Costa in London [email protected]; Nick Taborek in New York at [email protected]
To contact the editor responsible for this story: Lynn Thomasson [email protected]
