BLBG: U.S. Stocks Decline as BOJ Leaves Stimulus Unchanged
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, after Bank of Japan Governor Haruhiko Kuroda said he sees no need to expand monetary stimulus immediately.
All 10 industry groups in the S&P 500 retreated as commodity and financial companies dropped the most. JPMorgan Chase & Co. and Bank of America Corp. fell more than 1.1 percent, pacing losses among lenders. Lululemon Athletica Inc. (LULU) tumbled 15 percent after announcing that Chief Executive Officer Christine Day will leave the company. Sprint Nextel Corp. (S), which agreed in October to a takeover by SoftBank Corp., gained 2.2 percent after the Tokyo-based mobile carrier raised its offer.
The S&P 500 declined 0.8 percent to 1,629.67 at 10:04 a.m. in New York. The Dow Jones Industrial Average lost 107.51 points, or 0.7 percent, to 15,131.08. Trading in S&P 500 stocks was 22 percent higher than the 30-day average during this time of day.
“The market has almost become addictive to monetary stimulus,” Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, said in a phone interview. His firm oversees $170 billion. “Any sense that the monetary stimulus will slow down or stop, and that by no means is the case in Japan, but just on the margin Japan won’t be more aggressive is the reason for the concern.”
BOJ policy makers refrained from expanding their tools to address bond-market volatility and stuck with an April pledge to increase the monetary base by 60 trillion to 70 trillion yen ($713 billion) a year. The central bank left its one-year fixed-rate loan facility unaltered and Kuroda said the BOJ will consider longer funding operations if they become necessary.
“I haven’t seen the need for it so far,” Kuroda said.
Bull Market
Stimulus from the Federal Reserve and better-than-estimated earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 141 percent from a 12-year low in 2009. The index has fallen 2.5 percent from its record high on May 21, the day before Fed Chairman Ben S. Bernanke suggested the central bank could curtail its $85 billion monthly bond purchases if the economy improved in a “real and sustainable way.”
Inventories at U.S. wholesalers rose at a slower pace in April as sales accelerated. The 0.2 percent increase in stockpiles followed a 0.3 percent gain in March, the Commerce Department said today. The median forecast in a Bloomberg survey called for a 0.2 percent advance in April. Sales climbed 0.5 percent in April after a 1.4 percent decrease the prior month.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, jumped 7.6 percent today to 16.62. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-year low in March and has since surged 47 percent.
Cyclical Retreat
Companies whose growth is most tied to economic swings led the retreat. Raw-material and financial companies fell more than 1.3 percent for the worst performance among the S&P 500’s 10 industries. The Morgan Stanley Cyclical Index slid 1.1 percent.
JPMorgan Chase slipped 1.9 percent, the most in the Dow, to $53.31. Bank of America fell 1.1 percent to $13.15.
Freeport-McMoRan Copper & Gold Inc. lost 1.6 percent to $30.40 as gold prices fell.
Lululemon (LULU) plunged 15 percent to $69.57 after saying Day will step down once a replacement is found. The yoga-wear retailer said yesterday that net income for the quarter ended May 5 rose 1.4 percent to $47.3 million, or 32 cents a share, from a year earlier. Analysts projected 30 cents, the average of 25 estimates compiled by Bloomberg.
Recruiting Practices
Corinthian Colleges Inc. tumbled 12 percent to $2.46 after the U.S. Securities and Exchange Commission began an investigation into the for-profit college chain’s student-recruitment practices.
Sprint (S) rose 2.2 percent to $7.34. SoftBank, the Japanese mobile carrier controlled by Masayoshi Son, raised its offer for Sprint by 7.5 percent to $21.6 billion to counter a rival bid from billionaire Charlie Ergen’s Dish Network Corp.
Catamaran Corp., the fourth-largest drug-benefits manager, surged 14 percent to $55.54 after it won a 10-year deal with Cigna Corp. to manage prescription-drug benefits for the health insurer’s clients.
To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
