U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest weekly drop in almost two months, as investors weighed data showing housing starts climbed in July while a gauge of consumer confidence fell.
Eight of 10 industries in the benchmark index retreated, led by a drop among high-yielding dividend stocks as Treasury 10-year rates rose to a two-year high. Verizon Communications Inc. lost 1.7 percent as phone stocks sank. Real-estate shares plunged 2.2 percent as a group to the lowest level since November. Nordstrom Inc. (JWN:US) lost 4.9 percent as the retailer cut its annual sales forecast.
The S&P 500 dropped 0.3 percent to 1,655.83 at 4 p.m. in New York. The benchmark gauge lost 2.1 percent in the past five days, the most in a week since June 21. The Dow Jones Industrial Average slipped 30.72 points, or 0.2 percent, to 15,081.47. The 30-stock index plunged 2.2 percent this week, the most since June 2012. About 5.9 billion shares exchanged hands on U.S. exchanges today, 6.6 percent below the three-month average.
“People seem to be in a mode of not being too excited about the U.S. right now,” Brian Burrell, equity research analyst for Thornburg Investment Management Inc., said in a telephone interview from Santa Fe, New Mexico. His firm oversees about $90 billion. “People are scrutinizing these data points and trying to get a read on what is going to happen and how the Fed is going to react.”
The S&P 500 lost 1.4 percent yesterday, as forecasts from Cisco Systems Inc. and Wal-Mart (WMT:US) Stores Inc. disappointed while improving economic data pushed bond yields higher amid concern the Federal Reserve will reduce stimulus. The gauge has fallen 3.2 percent since closing at a record on Aug. 2.
Data today showed new-home construction in July climbed 5.9 percent to an 896,000 annualized rate from a revised 846,000 pace in June that was higher than previously reported. Builders started work on fewer single-family homes in July, marking a pause in the residential construction rebound that’s helping to propel the U.S. economy.
Consumer confidence in the U.S. unexpectedly dropped in August from a six-year high as Americans faced rising interest rates. The Thomson Reuters/University of Michigan preliminary August index of consumer sentiment fell to 80 from 85.1 last month, which was the highest since July 2007.
A separate report from the Labor Department indicated the productivity of U.S. workers rose more than projected in the second quarter as the world’s largest economy expanded output.
Central bank policy makers have been scrutinizing economic data to determine the timing and pace of any reduction in its $85 billion in monthly bond purchases. The Fed stimulus helped propel the S&P 500 (SPX) up more than 150 percent from its low in 2009.
“One can’t go a day without thinking about what the Fed’s policy is going to be because central banks are the elephant in the room,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC in Pittsburgh, which manages $58 billion, said in a phone interview. “I would not be surprised to see a little bit more slop in the equity markets here over the coming days and weeks.”
The Fed will reduce the monthly purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction at next month’s meeting. The first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, the survey showed.
The Chicago Board Options Exchange Volatility Index, or VIX (VIX), fell 2.4 percent today to 14.37 after yesterday touching the highest level this month. While the gauge has advanced 21 percent since Aug. 5, it remains 20 percent lower for the year.
Investors seeking shelter from yesterday’s $100 billion stock selloff pushed volume to a two-month high in U.S. equity volatility futures, contracts that have already seen more trading in 2013 than all of last year.
About 234,000 futures contracts on the Chicago Board Options Exchange Volatility Index, or the VIX, changed hands yesterday. That’s the most since June 21, according to data compiled by Bloomberg.
“I expect volatility and the VIX to have a bias towards creeping higher as we approach the September FOMC meeting,” Trevor Mottl, Susquehanna Financial Group LLLP’s New York-based head of derivatives strategy, said yesterday in a phone interview. Volatility will “remain slightly elevated as investors come to grips with implications from a reduction in stimulus,” he said.
High-yielding stocks declined today on concern rising bond rates will reduce demand for equity income. Yields on 10-year (USGG10YR) Treasury notes surged six basis points to 2.83 percent, the highest since July 2011.
Telephone stocks, which have the highest yield among 10 industries, slid 1 percent. Verizon lost 1.7 to $47.71 for the biggest drop in the Dow. Utilities, ranked the second highest with a 4.1 percent yield, fell 1.1 percent.
An S&P index of real-estate stocks sank for the 14th time in 15 sessions, losing 2.2 percent today for the biggest slide in the among 24 groups in the benchmark gauge. Kimco Realty Corp. dropped 3.7 percent to $20.50 to pace losses.
Nordstrom retreated (JWN:US) 4.9 percent to $56.43. Sterne, Agee & Leach lowered its rating the stock to neutral from buy after the Seattle-based fashion retailer cut its annual earnings forecast late yesterday.
J.C. Penney Co. fell (JCP:US) 3.1 percent to $13.40. The slide snapped a two-day rally that pushed the stock up 9.1 percent after investor Bill Ackman resigned from the board. The company reports results Aug. 20 and analysts project a second-quarter net loss that will widen and sales that will fall 8 percent, according to estimates compiled by Bloomberg.
An index that tracks homebuilder stocks rose 0.1 percent, retreating from an intraday high of 3.4 percent. The S&P Supercomposite Homebuilding Index has fallen 6.1 percent this year. PulteGroup Inc. added 2.3 percent to $16.28.
Aspen Technology Inc. (AZPN:US) surged 7.9 percent to $34.32. The supplier of software products reported fourth-quarter revenue of $83.3 million, topping the median analyst forecast (AZPN:US) of $78.8 million.
Pandora Media Inc. added 2.5 percent to $20.34. Goldman Sachs increased its rating on the biggest online radio service to buy from neutral.
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