U.S. Stocks Decline Before Speech From Fed’s Evans
<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 Namitha Jagadeesh & Nick Taborek - Aug 6, 2013 10:00 PM GMT+0800</cite>
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, as investors awaited an address by Federal Reserve Bank of Chicago President Charles Evans for indications of the central bank’s policy.
International Business Machines Corp. retreated 2.2 percent after requiring most U.S. employees in its hardware division to take a week off amid slowing demand. Plains All American Pipeline LP dropped 2.9 percent as profit trailed analysts’ estimates. Washington Post Co. rallied 6 percent as Amazon.com Inc. Chief Executive Officer Jeff Bezos agreed to buy its newspaper assets for $250 million.
Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg
The S&P 500 fell 0.4 percent to 1,701.06 at 9:58 a.m. in New York. The Dow Jones Industrial Average decreased 86.93 points, or 0.6 percent, to 15,525.20. Trading in S&P 500 stocks was 19 percent below the 30-day average at this time of day.
“The U.S. market is a bit overbought at the moment,” said Enrico Carbonelli, a Lugano, Switzerland-based associate director of portfolio management at BSI SA, which oversees the equivalent of $93 billion. “In the coming month, we may see a little bit of a correction before going higher. There’s a bit of concern about the Fed tapering its stimulus, but bonds will probably suffer more than equities.”
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 equity gauge has advanced 19 percent this year and is trading at 15.5 times estimated earnings, compared with an average of 13.9 over the last five years, data compiled by Bloomberg showed.
Evans Speech
Evans is speaking to reporters today at 8:30 a.m. in Chicago. His remarks will be made public at noon local time. Evans is a voting member of the Federal Open Market Committee this year and has consistently supported increased stimulus. He said May 20 that he’d like to see monthly employment growth of 200,000 or more for at least six months before judging the labor market substantially improved.
The S&P 500 fell 0.1 percent yesterday after Fed Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said the central bank is closer to slowing its $85 billion in monthly bond buying.
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 that 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.
Trade Deficit
The U.S. trade deficit narrowed more than forecast in June to the lowest level since October 2009 as crude oil imports declined and American companies shipped more goods abroad, the Commerce Department reported today.
Better-than-expected corporate earnings have also bolstered stocks in recent weeks. Some 31 companies in the S&P 500 report earnings today, including Marathon Oil Corp. and Walt Disney Co. Of the 415 members that have posted quarterly results so far, 73 percent have exceeded analysts’ estimates for profit, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.2 percent today to 11.84. The equity volatility gauge reached its 2013 peak in June and has since fallen 42 percent.
IBM Furlough
IBM lost 2.2 percent to $191.15 for the biggest drop in the Dow. The world’s biggest computer-services company said U.S. employees in its hardware division will take a furlough week with one-third pay starting either Aug. 24 or Aug. 31.
The company is cutting costs after server demand slowed in the second quarter. Sales in the hardware business, which includes storage devices and microelectronics, slid 12 percent in the period from a year earlier to $3.76 billion.
Plains All American, a publicly traded limited partnership involved in transportation and storage of crude oil, slid 2.9 percent to $52.01. The company reported second-quarter adjusted profit of 56 cents for each limited-partner unit, missing the 60-cent average estimated by analysts in a Bloomberg survey.
American Eagle Outfitters Inc. (AEO) fell 16 percent to $16.82. The teen apparel chain yesterday said second-quarter profit was less than it forecast amid disappointing sales of women’s clothing and weak shopper traffic.
Washington Post Co. advanced 6 percent to $602.82. Bezos agreed to buy the Washington Post newspaper that is the core of the company’s weakest division. Washington Post Co., which isn’t selling its Kaplan education division and other businesses, plans to change its name.
Retailers’ Results
Michael Kors Holdings Ltd. (KORS) rose 3.1 percent to $69.98. The fashion designer’s first-quarter results topped forecasts amid surging North American sales. The company also forecast full-year profit above analysts’ predictions.
Fossil Group Inc. gained 15 percent to $123.79. The fashion accessories designer reported results earlier today that beat analysts’ estimates. The company also raised its full-year earnings forecast.
Fossil slid the most in the S&P 500 yesterday after a Barclays Plc analyst downgraded the shares to underweight from equalweight.
To contact the reporters on this story: Namitha Jagadeesh in London [email protected]; Nick Taborek in New York at [email protected]
To contact the editor responsible for this story: Lynn Thomasson [email protected]
