U.S. stocks fell, after the Standard & Poor’s 500 Index closed at a record yesterday, as Best Buy (BBY:US) Co. tumbled and earnings at companies from Citigroup Inc. to CSX Corp. (CSX:US) disappointed investors.
Best Buy slumped 29 percent after reporting a drop in U.S. same-store sales during the holiday shopping season. Citigroup and Goldman Sachs Group Inc. led declines among banks after releasing fourth-quarter results. CSX dropped 6.8 percent as profit (CSX:US) missed analysts’ forecasts for the first time in two years. Intel Corp. slid 2.6 percent in extended trading after forecasting sales that may fall short of some estimates.
The S&P 500 lost 0.1 percent to 1,845.89 at 4 p.m. in New York, dragging the gauge lower for the year. The Dow Jones Industrial Average fell 64.93 points, or 0.4 percent, to 16,417.01. About 6.3 billion shares changed hands on U.S. exchanges, 4.4 percent above the 30-day average.
“It’s not going to be a straight road up like what we saw in 2013,” Robert Pavlik, chief market strategist at Banyan Partners LLC, which manages $4.5 billion, said in a phone interview. “A lot of what we saw in 2013 was predicated on money flowing into the market from the Fed. It’s going to be an upwards revision to earnings consensus this year that will push the market higher.”
The S&P 500 gained 0.5 percent yesterday, briefly erasing its losses for 2014, as the World Bank raised its global-growth forecast and better-than-estimated earnings from Bank of America Corp. fueled a rally in financial shares. The benchmark measure trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
Citigroup, Goldman Sachs and 12 other S&P 500 companies report earnings today. Per-share profit for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analysts surveyed by Bloomberg.
“When you look at fundamentals, the market is not screamingly cheap, but it’s not screamingly expensive either,” Sandy Lincoln, the Chicago-based chief market strategist in the U.S. with BMO Global Asset Management, which oversees about $130 billion, said in a phone interview. “We like the market here. There is reason be skeptical about what companies are able to do. The top line hopefully will be supportive enough to overcome the skepticism.”
BlackRock Inc. Chief Executive Officer Laurence D. Fink said U.S. stocks may rise as much as 10 percent this year after the S&P 500 (SPX) jumped 30 percent in 2013.
Fewer Americans filed applications for unemployment benefits last week, a sign the labor market continues to strengthen. Jobless claims decreased by 2,000 to 326,000, the least since the end of November, from a revised 328,000 in the prior period, a Labor Department report showed today. The median forecast of 51 economists surveyed by Bloomberg called for 328,000.
Another report showed the cost of living in the U.S. climbed in December by the most in six months, led by gains in fuel and rents. The 0.3 percent increase in the consumer-price index was the biggest since June and followed no change the prior month.
The Fed said in its Beige Book yesterday that it saw “moderate” growth across most of the U.S. The business survey is based on reports gathered on or before Jan. 6. The central bank, which next meets Jan. 28-29, decided at its December meeting to start reducing the pace of monthly bond purchases by $10 billion to $75 billion.
The Chicago Board Options Exchange Volatility Index (VIX) gained 2 percent to 12.53. The gauge of S&P 500 options known as the VIX is down 8.7 percent this year.
Four of 10 S&P 500 groups retreated as financial and consumer-discretionary shares dropped more than 0.5 percent to lead declines.
Best Buy tumbled 29 percent, the most in the S&P 500, to $26.83. The consumer-electronics retailer said same-store sales fell 0.9 percent in the nine weeks ended Jan. 4, as price cuts and the first new video-game consoles in several years didn’t draw as many shoppers as expected.
Citigroup lost 4.4 percent, the most since November 2012, to $52.60. The third-biggest U.S. bank reported fourth-quarter profit that missed Wall Street estimates as bond trading slumped.
Goldman Sachs fell 2 percent to $175.17 even as results beat analysts’ estimates. Chief Executive Officer Lloyd C. Blankfein reported a fourth straight year of lower profitability than the firm achieved in the decade before the financial crisis. Goldman Sachs’s return on equity, a gauge of profitability, was 11 percent last year, and the company has struggled to reach 10 percent in the past three years, a level that Blankfein has called “hardly aspirational.”
The Dow Jones Transportation Average (TRAN) slipped 0.6 percent from a record. CSX sank 6.8 percent, the most since September 2011, to $27.24 after the biggest railroad in the eastern U.S. said fourth-quarter net income slid 5.1 percent to $426 million, or 42 cents a share. Analysts had projected an average of 43 cents.
Other rail stocks fell. Norfolk Southern Corp. slid 3.7 percent to $87.76 while Kansas City Southern lost 1.7 percent to $117.10. Both companies report results next week.
J.C. Penney Co. dropped 1.6 percent to $6.90 after saying it will close 33 stores and eliminate about 2,000 jobs, resulting in pretax charges of $26 million in the fourth quarter and $17 million in future periods. The department-store chain has gone nine straight quarters without posting a profit.
Kroger Co. fell 4.9 percent to $37.35. The largest U.S. grocery chain is “particularly vulnerable” in the supermarket industry, where competition is rising and volume growth is weakening, analysts at Credit Suisse Group AG wrote in a note. They cut the stock’s rating to neutral from outperform.
Intel slipped 2.6 percent to $25.86 as of 4:24 p.m. in New York. After the market’s close, the world’s largest chipmaker forecast first-quarter sales that may fall short of some estimates as corporate spending on personal computers falters.
Hewlett-Packard Co. (HPQ:US) added 2.5 percent to $29.56 in regular trading. Bank of America raised its recommendation (HPQ:US) to buy from neutral, citing potential for increased earnings amid a restructuring. The maker of personal computers is committed to returning cash to shareholders through dividends and buybacks, the brokerage said.
BlackRock gained 1.6 percent to $317.78. The world’s biggest money manager said fourth-quarter net income increased 22 percent as investors put money into funds, boosting client assets and fees for managing them.
PNC Financial Services Group Inc. jumped 2.7 percent to $80.93, the highest level since September 2008. The second-biggest U.S. regional bank (PNC:US) said fourth-quarter profit grew 53 percent, beating analyst estimates, as the lender trimmed expenses and set aside less money for soured loans.
Charles Schwab Corp. climbed 3 percent to $26.80, the highest close since February 2001. The financial-services provider reported fourth-quarter earnings of 23 cents a share, beating analysts’ estimates of 21 cents.
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