Stocks fluctuate after S&P 500 record amid economy optimism

LONDON – U.S. stocks fluctuated between gains and losses, after benchmark indexes rallied to all-time highs yesterday amid optimism over the economic recovery.

Twitter Inc. slid 5.7 percent after Macquarie Group Ltd. downgraded the stock. Textron Inc. rose 1.6 percent after the manufacturer of Cessna aircraft said it will buy Beechcraft Corp. for $1.4 billion. FirstEnergy Corp. added 1.1 percent after the utility company was upgraded at Wells Fargo & Co. to outperform from market perform.

The Standard & Poor’s 500 Index dropped less than 0.1 percent to 1,841.63 at 11:41 a.m. in New York. The Dow fell less than 1 point to 16,479.49. Both measures are poised for their second weekly gain. Volume has been lower-than-average amid the Christmas holiday this week. Trading today in S&P 500-listed stocks was 40 percent below the 30-day average at this time of day.

“A year-end rally like this is not usual, but we have to keep in mind trading volumes are light and corporate news is certainly sparse this week,” Robert Landry, the San Antonio-based executive director and money manager at USAA Investments, said by telephone. His firm oversees about $59 billion. “You can’t read too much into the market’s move. It’s somewhat of a Santa Claus rally and perhaps that’s attributed to some portfolios managers in the office making some year-end moves.”

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The S&P 500’s retreat today halts a four-day rally fueled by improving economic data. A Labor Department report yesterday showed that jobless claims declined by more than forecast, boosting optimism in the world’s largest economy. There are no economic reports scheduled for today.

Annual gain

The benchmark equity index has advanced 29 percent in 2013, putting it on course for its biggest annual rally since 1997. The S&P 500 has gained 2 percent so far this month. December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent. The last December retreat for the S&P 500 was in 2007.

The Federal Reserve, which has made employment creation a determinant factor of its monetary stimulus, said on Dec. 18 that it will reduce the pace of bond buying amid faster-than-estimated economic growth. Three rounds of stimulus, known as quantitative easing, have sent the S&P 500 as much as up 172 percent from a 12-year low in 2009.

“I don’t see why stocks can’t have a reasonable year in 2014, given that the global economy does seem to very slowly improve and Fed has started a tapering program,” Landry said. “There are some things in place to suggest it could be a decent year for stocks but not on the magnitude we’ve seen this year.”

Volatility gauge

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 0.5 percent to 12.39, halting a four-day retreat. The gauge has dropped 31 percent this year, the largest annual decline since 2009.

Seven of 10 main S&P 500 groups retreated today, with producers of consumer discretionary products falling 0.3 percent to lead losses. Energy producers added 0.4 percent for the biggest advance.

Twitter Inc. dropped 5.7 percent to $69.14. The microblogging service was cut to underperform from neutral at Macquarie Group Ltd., which cited the stock’s 40 percent surge from Dec. 11 through yesterday.

Delta Air Lines Inc. retreated 3 percent to $27.05. The airline said yesterday it will honor tickets sold at incorrect prices on its website and through other booking channels after customers snapped up bargains like a round trip to Hawaii for $6.90.

Textron rose 1.6 percent to $36.78. The company, seeking to counter a slump in business-jet sales, agreed to buy Beechcraft to boost its lineup of propeller-driven aircraft.

Providence-based Textron will purchase all outstanding equity interests in Beech Holdings LLC, the parent of Beechcraft, it said in a statement yesterday. The deal, which includes the repayment of Beechcraft’s working capital debt, will be financed by a combination of available cash and as much as $1.1 billion in new debt.

FirstEnergy added 1.1 percent to $32.42. The Akron, Ohio-based company was upgraded by Wells Fargo analyst Neil Kalton, who said a potential dividend cut of 40 percent is “integral” to a positive view on the shares.

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