BLBG: U.S. Stocks Little Changed as Investors Await Earnings
U.S. stocks were little changed, after the biggest weekly drop of the year for the Standard & Poor’s 500 Index, as investors awaited Alcoa Inc. (AA)’s financial release to mark the beginning of the earnings season.
The S&P 500 (SPX) fell less than 0.1 percent to 1,552.98 at 9:32 a.m. in New York.
The S&P 500 fell 1 percent last week as U.S. payrolls had the smallest gain in nine months in March while other reports showed manufacturing and services industries expanded less than forecast. The index climbed to an all-time high of 1,570.25 on April 2. The benchmark has more than doubled from its 12-year low in March 2009, helped by the Federal Reserve’s unprecedented bond purchases and three straight years of profit growth.
Analysts project profits at S&P 500 companies fell 1.8 percent in the latest quarter, the first year-over-year decrease since 2009, according to estimates compiled by Bloomberg. Analysts had predicted a 1.2 percent increase when surveyed in January.
Alcoa, the first Dow Jones Industrial Average member to publish results each quarter, will report an 8-cent a share profit after the close of regular trading, according to the average of 18 analysts’ estimates compiled by Bloomberg. That would be two cents less than the earnings it posted in the first quarters of 2010 and 2012.
First Slump
Wagers that U.S. stock volatility will increase have reached a three-year high on concern American companies are getting ready to report the first slump in profit since 2009.
There were 6.54 million calls on the Chicago Board Options Exchange Volatility Index and 2.34 million puts on April 4, according to data compiled by Bloomberg. The ratio jumped to 2.93-to-1 last month, the highest since March 2010. The VIX, tracking S&P 500 option prices, climbed 23 percent from its six- year low in March.
“The weaker data and earnings would encourage higher volatility after an unchallenged rally throughout the first quarter,” Andrew Greeley, a senior managing director at Stamford, Connecticut-based Acorn Derivatives Management Corp., which manages more than $450 million in volatility assets, said on April 5.
Protecting Profits
Even bulls are taking steps to protect profits after gains in U.S. stocks added $10 trillion to equity values.
Russ Koesterich of BlackRock Inc. and Valentijn Van Nieuwenhuijzen at ING Investment Management, who bought equities in 2012, say risks are rising during a period in which stocks have lost an average 5.2 percent since 2010, data compiled by Bloomberg show. Concern the U.S. economy isn’t expanding fast enough prompted Koesterich to sell smaller companies. Van Nieuwenhuijzen is holding off on new share purchases.
Investors managing more than $5 trillion say they’re looking for ways to limit losses after the S&P 500 reached a record. That got harder in the first quarter, when rallies in drugmakers and utilities pushed valuations for so-called defensive industries to the highest since 2008.
“You have an increased risk of a correction now,” Koesterich, the chief investment strategist at New York-based BlackRock, the world’s largest money manager with $3.8 trillion in assets, said in an April 4 phone interview. “The parts of the market that have done the best, the defensives, have gotten very expensive,” he said. “This is a very different rally than what people are used to.”
To contact the reporters on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net; Lindsey Rupp in New York at lrupp2@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
