BLBG: U.S. Stocks Fluctuate Amid Housing Data, Violence in Iraq
U.S. stocks fluctuated, after equities halted a six-day rally yesterday, as data showed home prices rose at a slower pace than forecast and investors watched developments in Iraq.
Walgreen Co. lost 1.5 percent after reporting profit that fell short of analysts’ forecasts. Elizabeth Arden Inc. fell 3.4 percent after announcing a restructuring plan. Micron Technology Inc. (MU) rose 1.7 percent after reporting profit and sales that topped analysts’ estimates. Vertex Pharmaceuticals Inc. surged 40 percent after releasing results of a drug trial.
The Standard & Poor’s 500 Index slid 0.1 percent to 1,960.89 at 9:51 a.m. in New York. The Dow Jones Industrial Average fell 13.75 points, or 0.1 percent, to 16,923.51.
“With the market close to all-time highs, it’s getting harder and harder to move higher, and investors will want to lock in some profits now,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank AG in Bonn, Germany. “It makes sense to take a breather with high valuations, tension in Iraq, and people still waiting to see whether economic growth and U.S. companies have recovered from a weak first quarter. There may be a bit more nervousness, but markets have been quite stable and volatility remains very low.”
The equity benchmark gauge slipped less than 0.1 percent yesterday, halting the six-day rally that pushed it to a record last week. The index trades at 16.6 times the projected earnings of its members, close to its highest valuation in four years.
Small Swings
The U.S. equities market is experiencing its smallest swings of the year. The S&P 500 moved 0.25 percentage point from its highest and lowest points yesterday. That followed a swing of 0.24 point on June 20, the narrowest movement in more than 20 years besides a 0.20 point reading in December.
The Chicago Board Options Exchange Volatility Index, or VIX (VIX), a measure of S&P 500 options prices, closed at 10.98 yesterday, near its lowest level since 2007.
Data today showed home prices in 20 U.S. cities rose at a slower pace than forecast in the year ended in April. The S&P/Case-Shiller index of property values increased 10.8 percent from April 2013, the smallest 12-month gain in more than a year, after rising 12.4 percent in March.
A report yesterday indicated sales of previously owned homes climbed last month the most since October, while prices increased at the slowest pace in more than two years.
Confidence Data
Data at 10 a.m. in New York may show confidence among U.S. consumers climbed in June to near its highest level since 2008. The Conference Board index probably climbed to 83.5 from 83 in May, according to the median estimate in a Bloomberg News survey of economists. Commerce Department data at the same time will probably show that new-home sales rose in May, projections show.
“The better the economic news gets, the quicker the Fed has to raise rates,” Ben Wallace, portfolio manager at Westborough, Massachusetts-based Grimes & Co Inc., said in a phone interview. Wallace helps oversee $1.6 billion in assets. “We’re continually trying or reconcile the fact that we’ve had this moderate growth economic outlook with the Fed, which is in a policy posture that is in tune with weak economic growth, and that’s not what we have.”
The S&P 500 is up 8.1 percent since a low on April 11 as data showed the economy is recovering from extreme weather and the first drop in first-quarter gross domestic product since 2011. The government’s third revision to the GDP reading, due June 25, is expected to show a contraction of 1.8 percent, according to a Bloomberg survey of economists.
Plosser Forecast
Federal Reserve Bank of Philadelphia President Charles Plosser said he’s “fairly optimistic” economic growth will exceed 2.4 percent for the remainder of this year and next amid steady growth in jobs. Consumption will probably rise as household balance sheets improve and unemployment declines to 5.8 percent by the end of this year, he said today in remarks prepared for a speech to the Economic Club of New York.
“The rebound after the bad winter seems to be progressing, the outlook for unemployment is a bit better, and the inflation rate appears to be firming,” Plosser said. “Current data suggest economic strength is fairly broad-based.”
Fed Chair Janet Yellen last week said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. She emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.
Fed Stimulus
Fed policy makers on June 18 trimmed bond buying by $10 billion for the fifth straight meeting, to $35 billion per month, while reiterating that they plan to keep the main rate close to zero. The stimulus has helped propel the S&P 500 higher by as much as 190 percent from a bear-market low in 2009. for a “considerable time” after ending the purchases.
Investors are also watching developments in Iraq, where U.S. Secretary of State John Kerry is seeking to prod the country’s leaders to unite against an al-Qaeda offshoot that has seized control over areas of the country, OPEC’s second-biggest oil producer.
In Ukraine, pro-Russian forces called a cease-fire in fighting against government troops. Russian President Vladimir Putin asked lawmakers in the upper house of parliament to rescind approval they granted to use force in Ukraine in a conciliatory gesture before his trip to Europe.
Six of the 10 main S&P 500 groups retreated today, with consumer-staples shares falling 0.6 percent to pace declines. Health-care stocks rose 0.2 percent for the biggest gain.
Arden, Vertex
Elizabeth Arden fell 3.4 percent to 27.33. The maker of Elizabeth Taylor and Britney Spears perfumes announced a restructuring program that will eliminate jobs and shut its Puerto Rico affiliate.
Walgreen lost 1.5 percent to $72.65. The operator of a drugstore chain said third-quarter adjusted profit was 91 cents a share, short of the 94 cents analysts estimated.
Micron Technology climbed 1.7 percent to $31.77. The largest U.S. maker of memory chips said third-quarter profit rose to $806 million, while sales climbed to $3.98 billion. Both measures exceeded analysts’ projections, with limited supply in the industry bolstering prices. The stock has rallied 44 percent this year.
Sonic Corp. rose 0.5 percent to $22.77. The owner of drive-in restaurants said adjusted profit climbed to 30 cents a share in the third quarter, more than the 29 cents that analysts projected. Sales of $152.2 million also beat estimates.
Vertex surged 40 percent to $92.94. A combination of two of the company’s drugs significantly improved lung function in clinical trials on patients with the most common form of cystic fibrosis, holding out the promise of a new treatment for the genetic illness.
To contact the reporters on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net; Oliver Renick in New York at orenick2@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net Jeremy Herron, Srinivasan Sivabalan
