Sunday, November 17, 2013

U.S. Stocks Fluctuate as Investors Watch Fed Comments

U.S. stocks fluctuated, after the Standard & Poor's 500 Index climbed to a record this week, as investors watched speeches from Federal Reserve policy makers for clues on when the central bank may scale back stimulus.

AK Steel Holding Corp. (AKS) plunged 8.6 percent, leading losses among steelmakers, after predicting a third-quarter loss. Rockwell Collins Inc. fell 4.9 percent after its projection missed analysts' estimates. Darden Restaurants Inc. dropped 5.5 percent after earnings trailed forecast. Apple Inc. rose 0.8 percent as its iPhone 5s and 5c handsets go on sale today.

The S&P 500 slipped less than 0.1 percent to 1,721.90 at 10:51 a.m. in New York after earlier rising as much as 0.2 percent. The Dow Jones Industrial Average fell 15.78 points, or 0.1 percent, to 15,620.77.

"It's probably a little confusing to the market what's coming out of the Fed," John Kvantas, a San Antonio, Texas-based executive director who helps manage more than $16 billion at USAA Investments, said in a phone interview. "Maybe the Fed is trying to send a message that 'yeah we didn't taper, but it doesn't mean we will never taper and maybe actually will taper still quite soon.'"

Trading in S&P 500 (SPX) stocks was 66 percent above the 30-day average at this time of day as futures and options contracts expire in a process known as quadruple witching that can lead to unpredictable price swings. Announced index changes, such as the addition of Visa Inc., Goldman Sachs Group Inc. and Nike Inc. to the Dow and the S&P 500's inclusion of Vertex Pharmaceuticals Inc. and Ametek Inc., also take effect after the markets close.

More Evidence

The S&P 500 has climbed 2 percent this week, rebounding from its worst month since May 2012 to reach a record on Sept. 18 after the central bank unexpectedly refrained from reducing monetary stimulus. The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 b! illion-a-month bond-buying program. The stimulus helped boost the equity index 155 percent higher since March 2009.

The Fed is now expected to begin tapering asset purchases in December, with 24 of 41 economists surveyed Sept. 18-19 saying the central bank won't take the first step in slowing its $85 billion in monthly bond buying until then.

Fed Bank of St. Louis President James Bullard will speak on the economy and monetary policy at a New York Association for Business Economic lunch today. Kansas City Fed President Esther George and Minneapolis Fed President Narayana Kocherlakota will separately give speeches today. George dissented for the sixth Federal Open Market Committee meeting in a row this week, repeating that the bank risks creating financial imbalances.

'Let's Wait'

Equity futures turned lower after Bullard, a voter on policy this year who has backed the bond buying, said earlier today the decision not to taper was a close call and "small" cuts are possible next month. Policy makers meet Oct. 29-30.

"Weaker data came in," Bullard said on Bloomberg Television's "Bloomberg Surveillance" with Tom Keene and Michael McKee. "That was a borderline decision," and "the committee came down on the side of, 'Let's wait.'" With inflation low, Bullard said, "we can afford to be patient."

The debate on when to cut stimulus and by how much has whipsawed stocks since May, when Fed officials first indicated reductions could start this year. The S&P 500 tumbled 5.8 percent from a record on May 21 through June 24. It rebounded 8.7 percent to close at a fresh high on Aug. 2 before slumping 4.6 percent as investors increasingly anticipated cuts at the September meeting. The gauge rallied 5.8 percent from that Aug. 27 low to its latest record.

Barclays Forecast

The U.S. economy will expand 1.6 percent this year, the slowest pace since the recession ended in 2009, and grow by 2.7 percent in 2014, according to economists s! urveyed b! y Bloomberg. The Bloomberg Economic Surprise Index, which measures the degree to which economic data exceeded or missed projections, is at minus 0.01. It has fluctuated above and below zero since April, after reaching an 11-month high in February.

Barclays Plc boosted its year-end forecast for the S&P 500 by 13 percent to 1,800. "'Lower for longer' monetary policy is more probable than we believed a week ago," Barry C. Knapp, the firm's head of U.S. equity strategy, wrote in a note today.

Six of 10 S&P 500 main industries retreated as utility and telephone stocks slipped the most, losing at least 0.9 percent.

The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, fell 3.3 percent to 12.73, the lowest since Aug. 13 after retreating for a third day. The measure has declined 29 percent this year.

Steelmakers Drop

AK Steel slid 8.6 percent to $4.06. The steelmaker predicted its loss in the third quarter will be 22 cents to 27 cents a share, which includes a 9-cent loss related to a furnace outage in Middletown, Ohio.

U.S. Steel Corp., the largest U.S. producer of the metal, also fell, losing 2.7 percent to $20.59.

Rockwell Collins (COL) sank 4.9 percent to $70.61. The maker of airplane cockpit instruments forecast revenue in fiscal 2014 will be no more than $4.60 billion. That missed the average analyst estimate of $4.93 billion in a Bloomberg survey.

Darden Restaurants dropped 5.5 percent, the most in the S&P 500, to $46.59. The company's first-quarter profit trailed analysts' estimates amid declining sales at its Olive Garden and Red Lobster chains.

Apple rose 0.8 percent to $476. The company attracted long lines of shoppers at its retail stores today for the global debut of its latest iPhones, in the company's biggest move this year to stoke new growth.

Carl Howe, an analyst at Yankee Group, who correctly predicted opening weekend sales last ye! ar, said ! people may buy 7 million smartphones. That would surpass the record 5 million sold last year. Apple will sell as many as 6 million units, according to Gene Munster, an analyst at Piper Jaffray Cos.

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