Bloomberg News

U.S. Stocks Halt Six-Day Rally Amid Deals, Housing Data

June 23, 2014

U.S. stocks fell, with the Standard & Poor’s 500 Index dropping for the first time in seven sessions, as General Electric Co. led industrial shares lower to offset gains among energy producers.

General Electric fell 1.1 percent after clinching the $17 billion purchase of Alstom SA’s energy assets, its biggest acquisition ever. FMC Corp. dropped 4.9 percent after cutting its 2014 profit forecast. Integrys Energy Group Inc. jumped 12 percent after Wisconsin Energy Corp. agreed to pay $5.7 billion for the company. Micros Systems rose 3.4 percent as Oracle Corp. offered to buy it for a $68 a share.

The S&P 500 fell less than 0.1 percent to 1,962.61 at 4 p.m. in New York, nearly erasing an earlier decline of 0.2 percent in the final 15 minutes of trading. The Dow Jones Industrial Average lost 9.82 points, or 0.1 percent, to 16,937.26. Both gauges ended last week at records.

“You’re sitting up at all-time highs and you do have a geopolitical situation remaining out there that’s weighing on the market,” Bill Stone, chief investment strategist at PNC Wealth Management, said in a phone interview. He helps oversee $131 billion in assets under management. “We got on balance in the U.S. with some good economic numbers. It continues to tell the story of a snap back in second quarter GDP.”

The equities benchmark rose 1.4 percent last week, the most in two months, closing at an all-time high of 1,962.87. The Dow average also ended the week at a record. Federal Reserve Chair Janet Yellen said accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

Yellen emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.

Economic Contraction

The S&P 500 (SPX) is up 8.1 percent since a low on April 11 as data showed the economy is recovering from extreme weather and the first drop in first-quarter gross domestic product since 2011. The government’s third revision to the GDP reading, due June 25, is expected to show a contraction of 1.8 percent, according to a Bloomberg survey of economists.

Data today showed sales of existing homes climbed 4.9 percent to a 4.89 million annualized rate last month, the most since October, after a 4.66 million pace in April. Prices increase at the slowest pace in more than two years.

A separate report from Markit Economics showed a measure of U.S. manufacturing growth rose to 57.5 in June from 56.4 in May. Economists in a Bloomberg News survey estimated a decline to 56.0. A reading above 50 signals expansion.

Iraq Developments

“We came through a period where investors believed that the housing market was weather-affected and that hypothesis was viewed with suspicion,” Lawrence Creatura, a Rochester, New York-based portfolio manager at Federated Investors Inc., which oversees $366 billion in assets, said by phone. Today’s number was positive, though “no single data point is enough to redefine the health of the housing market,” he said. “It’s only after you’ve seen a series of data that you can be confident that the trajectory of the industry has changed.”

Investors have also been watching developments in Iraq, where government forces regained control of border crossings into Syria and Jordan, state-sponsored Iraqiya television reported, citing the defense ministry.

Advances made by fighters from the Islamic State in Iraq and the Levant have edged the country closer to sectarian conflict, raising fears of a reprise of the civil war in the years after the 2003 U.S.-led invasion.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 1.1 percent to 10.97. The measure is trading near its lowest level since 2007.

Energy Rally

Three stocks fell for every two that rose in the S&P 500 today. Four of the 10 main groups in the index retreated, with industrial shares dropping 0.7 percent to pace declines. Boeing Co. slid 1 percent to $130.85.

GE slipped 1.1 percent to $26.68. Chief Executive Officer Jeffrey Immelt, approaching 13 years on the job, prevailed over a bid from Siemens AG and initial French opposition. Buying Alstom’s gas-turbine operations and creating joint ventures in the steam turbine, renewable energy and electrical-transmission businesses will help his push to return GE to its industrial roots.

FMC dropped 4.9 percent to $71.10 for the biggest slide in the S&P 500. The herbicide and pesticide maker blamed prolonged winter weather in North America and drought in Brazil for hurting sales.

Energy Deal

Integrys Energy soared 12 percent to $68.35. Wisconsin Energy said it will acquire Integrys for $5.7 billion in cash and stock to nearly double its number of customers and increase revenue.

Micros climbed 3.4 percent to $67.98. Oracle agreed buy the company for about $4.6 billion as Chief Executive Officer Larry Ellison seeks to reignite slowing growth by adding software for hotels and restaurants. Oracle added 0.7 percent to $41.10.

Lululemon Athletica Inc. rose 2.5 percent to $41.25 as the yoga-clothing maker said it is working to improve its product line and improve value for shareholders.

To contact the reporter on this story: Oliver Renick in New York at orenick2@bloomberg.net

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


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