The Standard & Poor's 500 Index (VIX) snapped a four-week advance as investors weighed corporate earnings amid speculation that the Federal Reserve may reduce its asset purchases this year.
Caterpillar Inc. fell 4.2 percent after quarterly profit missed estimates and it cut its annual earnings forecast. McDonald's Corp. tumbled 2.2 percent after saying economic weakness would hurt results for the rest of the year. Homebuilders dropped 8.8 percent as a group as PulteGroup (PHM) Inc. and D.R. Horton Inc. lost more than 12 percent. Facebook Inc. (FB) surged 31 percent as mobile advertising helped profit.
The S&P 500 dropped less than 0.1 percent to 1,691.65, its first weekly decline since June 21. The benchmark index reached a record on July 22 and climbed within 3 points of 1,700 for three straight days before retreating. The Dow Jones Industrial Average (INDU) added 15.09 points, or 0.1 percent, to 15,558.83.
"The market is trying to figure out where we have some safety and where we have top-line and bottom-line growth," Samuel Lieber, the Purchase, New York-based chief executive officer at Alpine Woods Capital Investors, said in a telephone interview. His firm oversees $4.8 billion. "The underlying trend is being questioned."
The Fed has said economic data will determine the timing and pace of any reduction in its $85 billion in monthly asset purchases. A gauge of manufacturing in the mid-Atlantic region unexpectedly fell, while orders for durable goods rose more than forecast in June and consumer confidence unexpectedly increased in July to the highest level in six years.Bull Market
The S&P 500 (SPX) climbed 150 percent since March 2009 as the U.S. bull market has entered its fifth year, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the U.S. central bank. The stock gauge is heading for a 5.3 percent advance this month, the most since October 2011. The gauge fell in June, after seven successive months of gains, as Chairman Ben S. Bernanke said on May 21 the Fed could reduce its bond purchases as early as September.
Equity valuations have climbed 16 percent this year, with the S&P 500 trading at 16.1 times reported operating earnings, close to the highest level since May 2010, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, or VIX, gained 1.4 percent to 12.72 during the week. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, is down 29 percent for the year.More Clues
The coming week will offer more clues to the state of the economy. In addition to earnings reports will be data on U.S. gross domestic product and the monthly labor report, as well as monetary policy announcements by the Fed and the European Central Bank.
"The Fed is going to be meeting and there is speculation that maybe they will start to reduce their bond purchases in September," Peter Jankovskis, co-chief investment officer who helps manage $3.6 billion at Oakbrook Investments LLC, said via phone from Lisle, Illinois. "The reports that we have had and any statements they make are going to be the big lead-in to that story. The big driver really continues to be the employment statistics."
Exxon Mobil Corp. and Procter & Gamble Co. (PG) will be among 134 S&P 500 companies releasing results in the coming week. Of the 260 companies in the benchmark equity index that have posted quarterly results so far, 73 percent have exceeded analysts' estimates for profit and 57 percent have topped sales projections, data compiled by Bloomberg show.
Industrials lost 1 percent as a group for the week, the most among 10 industries in the S&P 500, followed by a 0.8 percent drop among energy producers.Slower Demand
Caterpillar (CAT) slid 4.2 percent to $82.06 for the steepest loss in the Dow. Earnings for the world's largest maker of mining and construction machinery trailed analysts' estimates for a third straight quarter and cut its forecast as mining-equipment sales declined on slower commodity demand from emerging markets.
McDonald's fell 2.2 percent, the second-most in the Dow, to $98.03. The world's largest restaurant chain posted second-quarter profit and revenue that fell short of analysts' forecasts and said sales for the rest of 2013 would be hurt by economic weakness.
Expedia Inc. (EXPE) sank 27 percent to $47.20 for the biggest retreat in the S&P 500 as the online travel agency missed sales and profit estimates amid increased competition. Netflix Inc. slumped 6.9 percent to $246.31 on slower-than-estimated subscriber gains.Homebuilders Tumble
An index of homebuilders fell 8.8 percent as PulteGroup and D.R. Horton reported lower-than-forecast orders, adding to concerns that higher mortgage rates will hamper the nation's housing recovery. PulteGroup plunged 16 percent to $16.36 for its biggest weekly decline in almost two years. D.R. Horton sank 12 percent to $19.33.
Health-care stocks and technology companies added at least 0.8 percent for the biggest gains of the week.
Facebook jumped 31 percent, its biggest weekly advance, to $34.01. The operator of the world's most popular social-networking service reported sales and profit that beat estimates. Chief Executive Officer Mark Zuckerberg's decision last year to bet big on mobile software is paying off, with sales of ads on wireless devices now on track to surpass revenue from desktop computers.Apple Jumps
Apple Inc. (AAPL) rose 3.8 percent to $440.99. The world's most valuable technology company, which hasn't refreshed its iPhone and iPad since last year, managed to exceed analysts' earnings projections, even as profit declined from a year earlier and sales were largely flat.
Boston Scientific Corp. (BSX) soared 13 percent to $10.96. The second-biggest maker of heart-rhythm devices reported profit that beat analysts' estimates and raised its forecast amid signs that demand for defibrillators and stents is starting to stabilize.
Starbucks Corp. (SBUX) rose 6.6 percent to a record $73.36 after profits topped forecasts. Chief Executive Officer Howard Schultz's push into food is starting to pay off, driving traffic into U.S. stores and lifting sales and profit.