U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a second day, after Bank of Japan Governor Haruhiko Kuroda said he sees no need to expand monetary stimulus immediately.
JPMorgan Chase & Co. and Citigroup Inc. (C:US) fell more than 1.6 percent, pacing losses among lenders. Lululemon Athletica Inc. (LULU:US) tumbled 18 percent after announcing that Chief Executive Officer Christine Day will leave the company. Sprint Nextel Corp. (S:US), which agreed in October to a takeover by SoftBank Corp., gained 2.4 percent after the Tokyo-based mobile carrier raised its offer.
The S&P 500 declined 1 percent to 1,626.13 at 4 p.m. in New York. The Dow Jones Industrial Average slipped 116.57 points, or 0.8 percent, to 15,122.02. About 6.4 billion shares changed hands, in line with the three-month average.
“The market has almost become addicted to monetary stimulus,” Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank in San Francisco, said in a phone interview. His firm oversees $170 billion. “Any sense that the monetary stimulus will slow down or stop, and that by no means is the case in Japan, but just on the margin Japan won’t be more aggressive is the reason for the concern.”
BOJ policy makers refrained from expanding their tools to address bond-market volatility and stuck with an April pledge to increase the monetary base by 60 trillion to 70 trillion yen ($713 billion) a year. The central bank left its one-year fixed-rate loan facility unaltered and Kuroda said the BOJ will consider longer funding operations if they become necessary.
Inventories at U.S. wholesalers rose 0.2 percent in April, slowing from a 0.3 percent gain in the previous month, as sales accelerated, data from the Commerce Department showed today.
Stimulus from the Federal Reserve and better-than-estimated corporate earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 140 percent from a 12-year low in 2009. The index has fallen 2.6 percent from its record high on May 21, the day before Fed Chairman Ben S. Bernanke suggested the central bank could curtail its $85 billion monthly bond purchases if the economy improved in a “real and sustainable way.”
“We’re going through a transition process right now, where better growth offset by higher interest rates is causing a lot of volatility,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages more than $120 billion. “On the longer term basis, higher rates are indicating better economic growth and that’s good for equities.”
Yields on 10-year and 30-year Treasuries touched the highest level in 14 months on concern that the central bank will slow monetary stimulus. Rising bond yields prompted investors to sell telephone and utility stocks that offer the highest dividend payouts. The two groups fell more than 4.9 percent in the past month, the most among the S&P 500’s 10 main industries.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, jumped 11 percent today to 17.07. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-year low in March and has since surged 51 percent.
Companies whose growth is most tied to economic swings led the retreat today. Commodity and financial companies fell more than 1.4 percent for the worst performance among S&P 500 groups. The Morgan Stanley Cyclical Index slid 1.2 percent and the Dow Jones Transportation Average erased 1 percent.
The KBW Bank Index tumbled 1.7 percent as all 24 members dropped. JPMorgan slipped 1.6 percent to $53.49.
Citigroup (C) declined 3.8 percent to $49.95. The bank could lose as much as $7 billion on currency swings, according to Charles Peabody, an analyst with Portales Partners LLC. Peabody, who predicted the mortgage market’s plunge as early as January 2005, said the firm’s reliance on revenue from abroad is now driving his concern that a global economic slowdown will hurt the bank more than U.S. rivals.
Lululemon (LULU) plunged 18 percent to $67.85 after saying Day will step down once a replacement is found. The yoga-wear retailer yesterday reported quarterly profit that beat analysts’ estimates.
Texas Instruments (TXN) Inc. fell 3.7 percent to $35.26. The largest maker of analog chips predicted second-quarter profit and sales that may fall short of analysts’ most bullish estimates as some consumer-electronics makers hold off on component purchases.
Corinthian Colleges Inc. tumbled 12 percent to $2.46 after the U.S. Securities and Exchange Commission began an investigation into the for-profit college chain’s student-recruitment practices.
Sprint (S) rose 2.4 percent to $7.35. SoftBank, the Japanese mobile carrier controlled by Masayoshi Son, raised its offer for Sprint by 7.5 percent to $21.6 billion to counter a rival bid from billionaire Charlie Ergen’s Dish Network Corp.
Catamaran Corp., the fourth-largest drug-benefits manager, surged 11 percent to $53.99 after it won a 10-year deal with Cigna Corp. to manage prescription-drug benefits for the health insurer’s clients.
GameStop Corp., the world’s largest video-game retailer, jumped 7.8 percent to $37.72 for the biggest increase in the S&P 500. Sony Corp. said its coming PlayStation 4 will allow unlimited used-game sales.
Dole Food (DOLE) Co. climbed 22 percent to $12.46. Chairman and Chief Executive Officer David Murdock, 90, offered about $645 million, or $12 a share, to buy out other shareholders in the fresh fruit and vegetable producer and marketer.
Questcor Pharmaceuticals Inc. surged 15 percent to $42.11. The drugmaker said it paid $60 million upfront for the rights to Novartis AG’s immune drug Synacthen in the U.S.
To contact the reporters on this story: Lu Wang in New York at email@example.com; Inyoung Hwang in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Lynn Thomasson at email@example.com