Bloomberg News

U.S. Stocks Fall as Investors Weigh Fed Comments, Data

June 28, 2013

U.S. stocks fell, with the Standard & Poor’s 500 Index snapping a streak of seven monthly gains, as comments from Federal Reserve Governor Jeremy Stein spurred concern the central bank may begin to reduce stimulus in September.

Accenture Plc (ACN:US), the world’s second-largest technology-consulting company, slumped 10 percent after its quarterly sales forecast missed analysts’ estimates. International Business Machines Corp. lost 2.3 percent for the biggest retreat in the Dow Jones Industrial Average. (INDU) BlackBerry, the Canadian smartphone maker, fell the most in 12 years after reporting a surprise quarterly loss.

The S&P 500 (SPX) fell 0.4 percent to 1,606.28 at 4 p.m. in New York. The index extended today’s decline into the close of trading as investors adjusted positions at end of the quarter. The Dow lost 114.89 points, or 0.8 percent, to 14,909.60 today. About 10.1 billion shares changed hands on U.S. exchanges, 53 percent above the three-month average.

“People are hearing all these various Fed governors speak and the message they’re trying to send isn’t necessarily any clearer than what was talked about by Bernanke last week,” Robert Pavlik, chief market strategist at Banyan Partners LLC, said by phone. His firm manages about $1.4 billion. “I didn’t really seen a reason to step up to be a buyer on the pullback we had and I didn’t see a lot of follow through at least on the institutional level.”

The S&P 500 yesterday capped the biggest three-day rally since early January on better-than-estimated economic data and assurances on stimulus efforts from Fed officials. Stein said today the central bank is providing more clarity about how it will wind down its $85 billion in monthly bond buying as unemployment falls toward 7 percent.

‘Primary Weight’

If the Fed makes a decision to begin reducing purchases in September, Stein said in New York, “it will give primary weight to the large stock of news that has accumulated since the inception of the program and will not be unduly influenced by whatever data releases arrive in the few weeks before the meeting.”

Fed Reserve Bank of Richmond President Jeffrey Lacker, who dissented against additional stimulus at every Fed meeting last year, said financial markets will remain volatile as policy makers debate how and when to curtail the central bank’s asset purchases program.

VIX Increase

The Chicago Board Options Exchange Volatility Index, the measure of options on the S&P 500 known as the VIX, has climbed 49 percent since hitting a six-year low in March. The gauge was unchanged at 16.86 today.

The S&P 500 has rallied 13 percent so far this year, the best performance since a 17 percent gain in the first six months of 1998. It has dropped 3.8 percent since May 21 as Fed Chairman Ben S. Bernanke signaled the central bank could taper quantitative easing as the economy improves. The gauge slid 1.5 percent in June, its first monthly decline since October.

Business activity in the U.S. cooled more than projected in June, a regional report showed. The MNI Chicago Report’s business barometer dropped to 51.6 from 58.7 in May, which was the highest in more than a year. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 55 economists surveyed by Bloomberg was 55.

Consumer sentiment fell less than forecast in June from an almost six-year high a month earlier. The Thomson Reuters/University of Michigan said its final index of confidence eased to 84.1 this month from 84.5 at the end of May, which was the highest since July 2007. The median forecast in a Bloomberg survey of economists called for 83 in the gauge after a preliminary reading of 82.7.

Continued Volatility

“I’m not surprised to see some pullback from three days of strength,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an interview. “But bulls are still not willing to let things come in too much with the end of quarter today. Only thing we can count on for the rest of today and next week is continued trader-driven volatility, in both directions.”

U.S. stock trading accelerated into the close, with about 3.8 billion shares, or 38 percent of today’s total, changing hands after 3:59 p.m. Trading volume averaged about 7.1 billion shares this month, the busiest since November 2011, according to data compiled by Bloomberg.

The volume figure got a boost today as Russell Investments concluded the annual revisions to its equity benchmark gauges. Russell’s annual revisions usually spur one of the busiest sessions of the year. Today’s total was the second highest in 2013 after 10.8 billion shares changed hands June 21, an options expiration day. Last year’s reconstitution on June 22 helped fuel a jump in volume to 9.73 billion shares, the highest total of the year.

Russell Reconstitution

Russell’s global stock indexes, including the Russell 1000 Index and the Russell 2000 Index, are used as benchmarks for $4.1 trillion in assets, according to the company’s website. In three of the previous four years, the reconstitution day ranked in the top 20 busiest trading sessions, data compiled by Bloomberg show.

Health-care shares and phone companies fell the most today, losing more than 0.7 percent, as eight of 10 industries retreated. Energy stocks and companies that rely on consumer discretionary spending gained, adding at least 0.4 percent.

Accenture tumbled 10 percent to $71.96 after saying fiscal fourth-quarter revenue will be $6.7 billion to $7 billion. That fell short of the $7.36 billion average estimate of analysts, according to data compiled by Bloomberg. IBM (INDU), the world’s largest seller of computer services, fell 2.3 percent to $191.11.

BlackBerry Sales

BlackBerry (BBRY) fell 28 percent to $10.46, the biggest decline since April 2000. The company reported a quarterly loss and lower-than-projected sales, hurt by sluggish demand and currency restrictions in Venezuela. The loss in the three months through June 1 was 13 cents a share, excluding some items. Analysts had estimated a profit of 8 cents on average, according to data compiled by Bloomberg.

Molycorp Inc., a producer of rare-earth minerals, jumped 11 percent to $6.20. The company said the U.S. Securities and Exchange Commission recommended no enforcement action be taken after completing an investigation into Molycorp’s public disclosures.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • ACN
    (Accenture PLC)
    • $80.2 USD
    • -0.12
    • -0.15%
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