U.S. Stocks Fall as Banks Decline Amid Fed Speeches
<cite class="byline" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; font-size: 11px; vertical-align: baseline; background-color: transparent; width: 640px; color: rgb(111, 111, 111); display: block; font-style: normal; line-height: 1.3em; position: static !important; background-position: initial initial; background-repeat: initial initial;">By Nikolaj Gammeltoft & Lu Wang - Sep 23, 2013 10:12 PM GMT+0800</cite>
U.S. stocks fell, following three weeks of gains for the Standard & Poor’s 500 Index, as financial shares slumped and investors watched speeches from Federal Reserve officials for clues on monetary policies.
Goldman Sachs Group Inc. and Citigroup Inc. declined at least 1.9 percent as Atlantic Equities LLP forecast a drop in fixed income trading revenue for the biggest U.S. banks. BlackBerry Ltd. dropped 2.7 percent after Jefferies Group LLC lowered its recommendation on the shares. Apple Inc. surged 4.5 percent after saying first-weekend sales of its new iPhones topped 9 million units.
The S&P 500 retreated 0.4 percent to 1,702.64 at 10:10 a.m. in New York. The Dow Jones Industrial Average lost 28.52 points, or 0.2 percent, to 15,422.57. Trading in S&P 500 stocks was 5.8 percent above the 30-day average at this time of day.
“The more people who speak from the Fed in one day, the less clarity there is,” Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co., said by phone. “People will be hanging at every word that’s said for more clues about our monetary policy. The German election was a positive and the data out of China was good news.”
The equity benchmark rose 1.3 percent last week as the Federal Open Market Committee said at its Sept. 17-18 meeting that it will continue to buy $85 billion of assets a month, surprising economists who had forecast a reduction. The S&P 500 has gained 6 percent for the quarter, and is up 19 percent for the year.
Fed Speakers
The S&P 500 fell 0.7 percent on Sept. 20 as Fed Bank of St. Louis President James Bullardsaid policy makers may decide to reduce their monthly bond purchases at the meeting in October.
Three other regional bank presidents speak today. Fed Bank of New York President William C. Dudley said policy makers must “forcefully” push against economic headwinds as the U.S. has yet to show “any meaningful pickup” in momentum. Fed Bank of Atlanta President Dennis Lockhart said U.S. monetary policy should focus on creating a more dynamic economy. Fed Bank of Dallas President Richard Fisher delivers a speech on U.S. banking in San Antonio, Texas at 12:30 p.m. local time.
The central bank has left its main interest rate near zero since December 2008 and has expanded its balance sheet to a record $3.66 trillion through three rounds of stimulus. The quantitative easing program has helped the S&P 500 surge more than 150 percent since March 2009.
The rally has pushed equities to their highest valuations in more than three years. At a record close on Sept. 18, the S&P 500 traded at 16.5 times reported earnings, a multiple not seen since May 2010, data compiled by Bloomberg show.
German Election
German Chancellor Angela Merkel was re-elected yesterday, winning the biggest tally since Helmut Kohl’s post-reunification victory of 1990. After campaigning on her stewardship of Europe’s biggest economy and her handling of the euro-area crisis, she said today that on “European policy orientation, nothing will change.”
In China, the preliminary reading of a purchasing managers’ index for manufacturing compiled by HSBC Holdings Plc and Markit Economics climbed to 51.2 in September from 50.1 in August. That beat the 50.9 median estimate of economists surveyed by Bloomberg News.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, jumped 9.2 percent to 14.32. The measure is down 21 percent this year. Eight of 10 S&P 500 industry groups declined, with financial shares falling 1.2 percent as a group for the largest drop. Technology shares had the best performance, gaining 0.5 percent.
Bank Shares
The largest U.S. banks’ fixed-income trading revenue will probably fall 20 percent in the third quarter from a year ago on lower volumes, Richard Staite, an analyst at Atlantic Equities wrote in a note. Staite cut his estimate for Goldman Sachs’s per-share earnings 18 percent to $2.47 and Citigroup’s by 14 percent to $1.05.
Goldman Sachs slipped 1.9 percent to $166.57 while Citigroup dropped 2.7 percent to $49.83.
BlackBerry slid 2.7 percent to $8.49 after Jefferies lowered its rating on the shares to hold from buy. The brokerage said the handset business has a negative value after the smartphone maker reported results. Jefferies also reduced its 12-month price estimate to $8 from $15.
BlackBerry fell the most in almost three months on Sept. 20, extending its decline this year to 27 percent. The company posted fiscal second-quarter revenue of $1.6 billion, less than the $3.03 billion average analyst projection in a Bloomberg survey.
Apple Rallies
Apple jumped 4.5 percent to $488.42. The company sold 9 million iPhone 5s and 5c models. That topped the 5 million in opening-weekend sales for last year’s model and surpassed analyst estimates that ranged from 6 million to 7.75 million, according to a Bloomberg poll.
TripAdvisor Inc. increased 1.6 percent to $76.35 after Stifel Nicolaus & Co. upgraded the stock to buy from hold. The online travel planning company is on course to rise for a fifth straight day.
General Electric Co. advanced 1.3 percent to $24.31 after winning contracts worth $2.7 billion from a unit of Sonelgaz, Algeria’s state-owned electricity and gas company. GE will supply heavy-duty gas turbines, steam turbines and generators for nine power plants, according to a statement.
Walgreen Co. added 2.1 percent to $56.68. Morgan Stanley boosted its rating on the stock to overweight from equal weight. The stock slipped 0.8 percent Sept. 20 after rising in 14 of the previous 15 sessions.
Even as the U.S. stock market roars to new highs, helped last week by the Fed’s statement, a risk is rising from another corner of Washington.
Budget Talks
Hardening positions on the federal budget and borrowing limit, and recent political setbacks suffered by both President Barack Obama and Republican congressional leaders as they go into the fight, are raising the odds of a government shutdown, debt default or near-miss that could roil equities markets.
Forty percent of global investors surveyed in a Sept. 10 Bloomberg poll said they would pull back on U.S. markets in the event of a government shutdown, which many economists say would be less damaging than a debt default.
“We are in for another ugly confrontation,” said Howard Ward, the chief investment officer for growth equity at Rye, New York-based Gamco Investors Inc., which oversees about $40 billion. “Even though everyone knows the impasse will be short-lived, it is a sad reminder of how dysfunctional Washington has become. It will be a catalyst for taking profits after the recent run-up.”
To contact the reporters on this story: Nikolaj Gammeltoft in New York [email protected]; Lu Wang in New York at [email protected]
To contact the editor responsible for this story: Lynn Thomasson [email protected]
