economic indicators

U.S. stocks fall on stimulus bets after jobs, factory reports

BLOOMBERG FILE PHOTO/TIM BOYLE
U.S. STOCKS FELL WEDNESDAY, sending the S&P Index to a one-month low, as jobs data missed estimates.
Posted 6/5/13

NEW YORK - U.S. stocks fell, sending the Standard & Poor’s 500 Index to a one-month low, as jobs and factory data missed estimates and investors speculated whether the Federal Reserve will taper bond purchases.

An index of homebuilders slumped 1.8 percent as mortgage applications dropped for a fourth straight week. Apple Inc. slipped 0.7 percent after a U.S. trade agency said it infringed a patent owned by Samsung Electronics Co. Microsoft Corp. and Joy Global Inc. fell at least 0.9 percent following analyst downgrades. Walgreen Co. climbed 1.8 percent as sales exceeded analysts’ estimates.

The S&P 500 lost 1 percent to 1,615.28 at 1:49 p.m. in New York, the lowest since May 6. The Dow Jones Industrial Average declined 160.19 points, or 1.1 percent, to 15,017.35. Trading in S&P 500 stocks was 5.7 percent higher than the 30-day average during this time of day.

Today’s economic data “may throw some cold water on this economic growth story continuing,” Bill Schultz, who oversees about $1.1 billion as chief investment officer at McQueen Ball & Associates in Bethlehem, Penn., said by phone. “So you got this contrast in what the Fed should do. All those cross- currents throw on some caution on the whole market. Investors are taking a pause and a more look-and-see approach than they have in the past, where equities are the only place to be.”

Investors considered mixed data today, as a report from ADP Research Institute showed companies in the U.S. hired fewer workers than projected in May amid federal budget cuts and higher taxes. Separate data from the Commerce Department showed U.S. factory orders in April fell short of estimates. A gauge of service industries, which covers almost 90 percent of the economy, rose more than forecast.

Jobs report

A Labor Department report on June 7 may show employers added 167,000 people to payrolls last month after a gain of 165,000 in April, according to the median of 85 economists’ estimates in a Bloomberg survey.

The S&P 500 has dropped 3.1 percent since closing at a record high on May 21 as Fed policy makers continue to debate whether the economy is strong enough to begin reducing monetary stimulus.

Fed Bank of Dallas President Richard Fisher, among the most vocal critics of additional easing, and Fed Bank of Kansas City President Esther George, who has dissented against record stimulus at every policy meeting this year, separately called for a reduction in the central bank’s $85 billion in monthly bond purchases yesterday. Atlanta Fed President Dennis Lockhart said earlier this week that “very mixed” economic data makes him “more cautious” about a near-term reduction.

Volatility gauge

The Fed stimulus and better-than-expected corporate earnings have propelled the bull market in U.S. equities into a fifth year and driven the S&P 500 up 139 percent from a 12-year low in 2009.

The Chicago Board Options Exchange Volatility Index, or VIX, climbed 6.5 percent today to 17.32. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, reached a six-year low in March and has since surged 54 percent.

All 10 S&P 500 industry groups retreated as raw-materials and industrial companies sank more than 1.3 percent. Alcoa Inc. fell 2 percent to $8.21 and General Electric Co. slipped 1.4 percent to $23.34.

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