The Standard & Poor’s 500 Index erased losses in the final hour of trading as investors weighed the Federal Reserve’s latest policy minutes for evidence that the central bank may be closer to additional stimulus actions.
Bank of America Corp. (BAC:US) and JPMorgan Chase & Co. (JPM:US) added more than 1 percent as financial companies rallied. Exxon Mobil Corp. rose 1.5 percent as oil rebounded from the lowest close in more than a week. DuPont Co. and Google Inc. (GOOG:US) fell at least 1.1 percent after analysts said the companies may miss estimates. Best Buy Co. sank 8.4 percent after electronics retailer Hhgregg (HGG:US) Inc. cut its forecasts.
The S&P 500 fell less than 0.1 percent to 1,341.45 at 4 p.m. New York time, after sinking as much as 0.6 percent earlier. The benchmark gauge has retreated 2.4 percent over five days amid concern about corporate profits. The Dow Jones Industrial Average lost 48.59 points, or 0.4 percent, to 12,604.53. Volume for exchange-listed stocks in the U.S. was 6 billion shares, 9.5 percent below the three-month average.
“You didn’t see any kind of commitment one way or another from the Fed in the minutes from last time,” Robert Pavlik, who helps manage $1.4 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. “You have to be taking a cautious approach to this market here, especially heading into the earnings season. I’m optimistic, but I’m not fully committed to the possibility of a terrific earnings season.”
Stocks initially turned lower as minutes from the Fed’s June meeting showed two participants believed more bond purchases are appropriate, while two others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase. Equities recovered as the S&P 500 briefly dipped below its average price over the past 50 days and analysts dissected the minutes, with Jefferies & Co. economist Ward McCarthy saying there’s a “reasonable probability” a third round of quantitative easing is announced in coming months.
“Between the Fed’s outlook and the technical support we should find at the moving average, there is generally going to be a lift and that’s exactly what you saw materializing,” said Peter Kenny, managing director in institutional sales at Knight Capital Group Inc. in Jersey City, New Jersey.
The Fed minutes come amid growing concern that the U.S. economy is faltering and corporate profits are shrinking. Goldman Sachs Group Inc. cut its estimate for second-quarter gross-domestic product growth twice today, lowering it to 1.3 percent after data on wholesale inventories and the trade deficit dimmed prospects for the economy. The S&P 500 slumped yesterday amid lower sales estimates at Applied Materials Inc. and Cummins Inc.
Profits for S&P 500 companies fell 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg. That would be the first decline since 2009, even as revenue is forecast to rise 2.5 percent. Analysts project profit growth of 3.9 percent and 15 percent, respectively, in the third and fourth quarters of 2012
“You’re seeing a weakening demand picture, at least in the near term, starting to take root,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said in a phone interview. His firm oversees $363.6 billion. “The key calibration is whether the market reaches the conclusion that weakness is broad-based, but it’s shallow and short in duration, or it’s going to be deeper and longer in duration. It’s too soon to make that call. I think that’s the question upon us over the next two weeks.”
Energy companies climbed the most among 10 S&P 500 industry groups today, rallying 1.4 percent, as oil rebounded from the lowest close in more than a week. Exxon rose 1.5 percent to $84.38, while Chevron Corp. gained 0.9 percent to $104.85.
Financial companies advanced. Bank of America rallied 2 percent to $7.63. JPMorgan climbed 1 percent to $34.59. JPMorgan, the biggest U.S. bank by assets, kicks off the industry’s second-quarter earnings season on July 13 and may report a profit of 76 cents a share, excluding accounting adjustments, according to the average estimate of analysts in a Bloomberg survey.
Abercrombie & Fitch Co. (ANF:US) had the biggest jump in the S&P 500, climbing 4.1 percent to $34.12. The teen-clothing retailer may substantially increase its buyback authorization from the current 12.9 million shares, the New York Post reported, citing a person it didn’t identify.
Wendy’s Co. (WEN:US) added 2.4 percent to $4.69. The hamburger chain was raised to outperform from neutral at Nick Setyan, an analyst with Wedbush Securities Inc. The 12-month price target is $5.50.
Mead Johnson Nutrition Co. (MJN:US) gained 4 percent to $78.28. The maker of the world’s best-selling Enfamil baby formula said China’s Hunan province apologized for “erroneous” reports claiming formula sold by the company contained a banned flavor additive.
DuPont dropped 1.1 percent to $47.14. Cooley May, an analyst with Macquarie Group Ltd., cut the stock’s rating to neutral from outperform, citing concern over profit growth in the company’s chemical and industrial businesses.
Google slid 1.8 percent to $571.19. The owner of the world’s most popular search engine may miss analysts’ second- quarter sales estimates because of a fluctuation in foreign exchange rates, according to Carlos Kirjner, an analyst with Sanford C. Bernstein & Co.
Best Buy, the largest U.S. consumer-electronics retailer, declined 8.4 percent to $19.37. Hhgregg plunged 36 percent, the most since its initial public offering in 2007, to $7.34. The Indianapolis-based appliance and electronics retailer cut its full-year forecast amid sinking television sales.
Goldcorp Inc. (G) tumbled 9.7 percent to $33.17. The second- largest producer of the precious metal by market value cut its full-year 2012 gold production forecast by as much as 9.6 percent after delays at a Canadian mine and a water shortage at a Mexican project.
Waste Management Inc. (WM:US) fell 4.5 percent to $31.59. The trash hauler was cut to underweight, the equivalent of sell, from equalweight at Morgan Stanley.
Blackstone Group LP’s Byron Wien said the S&P 500 may climb past 1,400 this year. Wien, vice chairman of the advisory services unit of the world’s biggest private-equity firm, recommended buying Apple Inc. (AAPL:US) shares and said the iPad maker is the “most innovative” U.S. company. He said he’s also bullish on gold because the metal will retain its value should global growth slow.
“When everybody is so negative it’s usually a good time to take the other side,” he said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “I think we can do better than 1,400.”
An advance to 1,400 would require a 4.4 percent increase in the U.S. equity benchmark from yesterday’s close. The S&P 500 has gained 6.7 percent this year. Apple shares have surged almost 50 percent this year.
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