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U.S. Stocks Fall From Records With Tech, Consumer Shares

By Joseph Ciolli
April 03, 2014 4:48 PM EDT 161 Comments

U.S. stocks fell, after benchmark indexes climbed to records, as consumer and technology shares slumped before the government’s monthly jobs report tomorrow.

An index of biotechnology shares plunged 2.7 percent, halting a three-day rally. The Nasdaq Composite Index fell 0.9 percent after four straight gains. Barnes & Noble Inc. plunged 14 percent as investor Liberty Media Corp. said it will reduce its stake in the bookstore chain. Google Inc. Class A shares added 0.6 percent while its Class C (GOOG) shares rose 0.5 percent after stock in the largest search engine effectively split. Anadarko Petroleum Corp. surged 15 percent to a record after settling federal environmental claims.

The Standard & Poor’s 500 Index slipped 0.1 percent to 1,888.77 at 4 p.m. in New York after closing the past two days at a record. The Dow Jones Industrial Average dropped 0.45 point to 16,572.55. The gauge earlier touched an all-time high before closing within five points of its record. About 6 billion shares changed hands on U.S. exchanges, 13 percent less than the three-month average.

“The market still wants to be positive and has this feeling of goodwill, but at times it runs into a little bit of resistance,” Robert Pavlik, chief market strategist at Banyan Partners LLC, which manages $4.5 billion, said in a phone interview. “Nobody wants to buy at an all-time high, and that’s where we are. People are a little bit more cautious. As we get closer to the payroll report, we’ll be in wait and see mode.”

The S&P 500 rose for a fourth day yesterday to a record 1,890.90, after a private report showing companies added to payrolls last month fueled optimism on growth in the economy.

The equities benchmark climbed 1.3 percent in the first three months of 2014, its fifth consecutive quarterly advance, and now trades at 17.4 times reported earnings. That’s the highest level since 2010 and 11 percent above its five-year average, according to data compiled by Bloomberg.

Small Caps

The Russell 2000 (RTY) Index dropped 1 percent to halt a four-day rally. The measure of small companies plunged 3.5 percent last week.

Data today showed the number of Americans filing applications for unemployment benefits rose more than forecast last week after reaching a six-month low, a sign that progress in the labor market remains fitful.

The government’s monthly jobs report due tomorrow will show that hiring increased in March, according to forecasts compiled by Bloomberg.

The Institute for Supply Management’s services index advanced to 53.1 last month from 51.6 in February, which was the slowest pace of expansion in four years. Economists predicted an increase to 53.5.

Reports from hiring to factory output had shown weakness this year as freezing temperatures and mountains of snow kept shoppers indoors, grounded flights and made it harder for shippers to fill product orders.

Largely Ignored

“Any negative reports are largely ignored at the moment, or only taken into account in the very short term,” said Kai Fachinger, who oversees about $700 million as a money manager at RobecoSAM AG in Zurich. “This shows the clear optimism of investors, and the market could rise even more, especially if tomorrow’s employment report comes in with good numbers.”

Federal Reserve Chair Janet Yellen said last week that “considerable slack” in the labor market is evidence that the central bank’s unprecedented accommodation will be needed for “some time” to put Americans back to work.

Investors have added $1.7 billion to U.S. equity exchange-traded funds in the past five days and put $984 million in bond ETFs, data compiled by Bloomberg show. Health-care stocks saw the most money added among industry ETFs, increasing $571 million during the past week. Industrial ETFs took in $459 million in the period.

Volatility Index

The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility known as VIX, rose 2.1 percent to 13.37. The gauge closed yesterday at its lowest since January after five straight declines.

Four of the 10 main S&P 500 groups retreated today, with technology and consumer-discretionary shares falling at least 0.5 percent to pace losses.

Facebook Inc. dropped 5.2 percent to $59.49, the lowest since January. The stock is down 17 percent from a March 10 high. TripAdvisor Inc. slid 4.1 percent to lead an index of consumer stocks lower. The online travel site plunged 11 percent last week.

Kellogg Co. rallied 6 percent to $66.39 for its biggest advance in nearly five years.

An S&P gauge of software stocks dropped 1 percent for the worst performance among 24 industries. Adobe Systems Inc. slid 4.6 percent to pace losses.

The Nasdaq Biotechnology Index slumped 2.7 percent, pushing its one-month loss to 11 percent, as all but 10 of 121 stocks in the gauge fell. The index had advanced 5.4 percent over the first three days of the week.

Vertex Pharmaceuticals Inc. slid 4.4 percent to $69.12 and Alexion Pharmaceuticals Inc. decreased 2 percent to $151.46.

Google Shares

Barnes & Noble Inc. plunged 14 percent to $19.12 as investor Liberty Media Corp. said it will reduce its stake in the bookstore chain, dropping a board seat and freeing the company to develop a strategy on its own.

Google Inc. Class C shares gained 0.5 percent to $569.74 while the Class A shares rose 0.6 percent to $571.50. The company issued 330 million nonvoting C class shares as part of a move that cements control for founders Sergey Brin and Larry Page. The A shares carry one vote, while non-trading B shares, mostly owned by the founders, have 10 votes.

Semiconductor stocks added 0.7 percent, as Intel Corp. gained 2 percent to $26.41 for the biggest advance in the Dow.

Anadarko Petroleum surged 15 percent to $99.02 for the biggest gain in the S&P 500. The company agreed to pay $5.15 billion to settle U.S. environmental claims stemming from its acquisition of oil and gas producer Kerr-McGee Corp. The U.S. Justice Department initially sought $25 billion to clean up 2,772 sites and compensate about 8,100 claimants.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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

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