BLBG: U.S. Stocks Fall as American Manufacturing Index Slips
U.S. stocks fell, pulling the Standard & Poor’s 500 Index (SPX) lower after a record high, as a report showed an index for American manufacturing slid in March.
Joy Global Inc., U.S. Steel Corp. and Freeport-McMoRan Copper & Gold Inc. tumbled more than 2.2 percent as industrial and raw-material shares had the biggest declines among 10 S&P 500 groups. General Mills Inc. fell 1.2 percent after Morgan Stanley downgraded the shares. EBay Inc. gained 4.1 percent after Canaccord Genuity Corp. upgraded the shares to a buy. Cliffs Natural Resources Inc. climbed 1.1 percent after JPMorgan Chase & Co. added the company to its focus list.
The S&P 500 fell 0.5 percent to 1,561.15 as of 10:52 a.m. in New York. The Dow Jones Industrial Average dropped 32.46 points, or 0.2 percent, to 14,546.08. Trading among S&P 500 shares was 18 percent below the 30-day average at this time of day. U.S. markets were closed March 29 for Good Friday. Markets in Australia, New Zealand, Hong Kong and most of Europe are closed today.
“The market is fairly sensitive at this level and that means we need continuing improvement in the economy to keeping moving stocks forward,” Randall Warren, who oversees about $80 million including options as chief investment officer of Warren Financial Service in Exton, Pennsylvania, said yesterday in a phone interview. “We need good economic reports and we’re going to need good earnings reports later this month.”
The S&P 500 rose 0.4 percent on March 28 to reach its highest closing level. It remains below the all-time intraday high of 1,576.09. The gauge rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market.
Manufacturing Data
The Institute for Supply Management’s factory index fell to 51.3 in March from 54.2 a month earlier, the Tempe, Arizona- based group said today. Economists projected a reading of 54 for gauge, according to the median forecast in a Bloomberg survey. Figures higher than 50 signal expansion.
A separate report showed construction spending in the U.S. rose in February, paced by the highest level of home building in more than four years. Data on March 29 showed consumer spending climbed in February by the most in five months and confidence unexpectedly improved in March, showing job-market gains are helping Americans overcome tax increases and concern about federal budget cuts.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, jumped 9 percent to 13.84 today. The gauge, known as the VIX, dropped 6.4 percent last week, and is down 23 percent for the year.
Industrial Shares
Industrial and raw-material shares dropped at least 0.7 percent among S&P 500 groups. Joy Global lost 3.2 percent to $57.62. Freeport-McMoRan retreated 2.2 percent to $32.37, and U.S. Steel slipped 3.7 percent to $18.77.
General Mills, with food brands from Yoplait yogurt to Pillsbury cookie dough, slipped 1.2 percent to $48.71 after Morgan Stanley downgraded the shares to equal weight from overweight.
EBay, operator of the largest online marketplace, gained 4.1 percent to $56.42 after Canaccord Genuity equity analyst Michael Graham upgraded the shares to buy from hold. The 12-month target price is $67.
Cliffs Natural Resources rose 1.1 percent to $19.21 as JPMorgan’s Michael Gambardella added the iron miner to the firm’s focus list.
Ruby Tuesday Inc. climbed 5.2 percent to $7.75 after Barron’s reported the casual dining chain may rise to $13 a share. Barron’s cited estimates by Cove Street Capital analysts, noting the restaurant chain has cut costs and focused on its core brand with “affordable” menus that could boost same-store sales.
Bull Market
The four-year bull market has sent the S&P 500 up more than 131 percent since it reached a 12-year low of 676.53 in March 2009. The rally is extending beyond the average length of bull markets, according to Birinyi Associates Inc. data that show cycles since 1962 have an average duration of four years. Of nine advances, four have lasted longer than the mean and the market rose for about six years during those periods.
The S&P 500 is trading closer to analyst price estimates than any time in at least seven years. Shares in the index are 5 percent away from analysts’ mean forecasts, according to data compiled by Bloomberg starting in 2006. That’s the smallest difference ever for the median stock and compares with the historical average of 14 percent.
Off Guard
Bulls say the narrowing spread shows securities firms were caught off guard by the rally and that equities will climb as they boost predictions. Bears say the slowness of analysts to respond means stocks have gotten so far ahead of themselves that even market optimists are uncomfortable with the increase, which has added more than $10 trillion to values since 2009.
“The market has moved so fast, it hasn’t given the analysts time to re-evaluate things,” Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital Advisors LLC in Indiana, Pennsylvania, said in a March 26 phone interview. “As we just finished earnings season and we’re winding down the first quarter, analysts will begin the process of reassessing. My sense is we’re looking for better economic and corporate things than we’re seeing today.”
To contact the reporters on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
