U.S. stocks fell Thursday, with the Standard & Poor’s 500 Index resuming a selloff started earlier this week, as signs of financial stress in Portugal fueled demand for haven assets.
Home Depot Inc. and Lowe’s Cos. fell at least 1.4 percent after a Deutsche Bank AG analyst lowered his estimates for their profits based on weak results at rivals. Shares in high-dividend yielding companies such as Verizon Communications Inc. advanced as U.S. Treasurys gained.
The S&P 500 fell 0.4 percent to 1,964.68 at 4 p.m. in New York, trimming an earlier decline of 1 percent that was the most since May 15. The Dow Jones Industrial Average lost 70.54 points, or 0.4 percent, to 16,915.07. The Russell 2000 Index fell 1 percent, paring a drop of 1.9 percent.
“People will shoot first and ask questions later when news like this hits,” said Lawrence Creatura, a fund manager at Federated Investors Inc. in Rochester, New York. His firm manages about $363.8 billion. “The concern of an event like this is always determining whether it’s occurring in isolation or whether it’s the first domino. It’s a classic flight to safety across the equity, commodities and bond markets.”
European stocks and Portuguese bonds tumbled with investor concern deepening over missed debt payments by a company linked to the Iberian nation’s second-largest lender. Portugal’s central bank said Banco Espirito Santo SA is protected after its parent missed the payments. U.S. Treasurys and gold rallied.
Thursday’s decline came after speculation that U.S. stocks have risen too far, too fast fueled losses earlier in the week as Raymond James & Associates Inc. said equities are vulnerable and Citigroup Inc.’s chief U.S. equity strategist cited concerns for a “severe” pullback. The S&P 500 ended last week at an all-time high and the Dow Jones Industrial Average topped 17,000 for the first time.
The Chicago Board Options Exchange Volatility Index rose 8.5 percent Thursday to 12.64. The gauge known as the VIX finished last week at a seven-year low before rallying 16 percent during the first two days of the week, the biggest surge since April.
The S&P 500 has not had a drop of 10 percent in more than two years, and has not fallen by more than 1 percent on a closing basis since April. The gauge trades at a valuation of 18 times reported earnings, the highest since 2011 when it was in the middle of a 19 percent slide, its biggest during the current five-year bull market.
Equities trimmed steeper losses amid speculation the day’s initial selloff was overdone.
“Everyone expected the worst, and the contagion fears were brought back to fruition, but as the day has gone on those fears have abated a bit,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “Right now the market is saying that their concerns are not going to be as widespread as they were when they walked in this morning."
U.S. equities Wednesday halted a two-day selloff as optimism about corporate earnings and jobs growth outweighed concern that Federal Reserve concern that investors may be growing complacent about risk.
A report Thursday showed fewer Americans than forecast filed applications for unemployment benefits last week, adding to signs the job market continues to strengthen. The latest government payrolls report showed job growth blew past expectations in June and the unemployment rate fell to the lowest level since before the financial crisis peaked six years ago.
More than 140 companies in the S&P 500, including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Johnson & Johnson, will report quarterly results between now and July 23, according to data compiled by Bloomberg.
Profit at S&P 500 companies probably rose 5 percent in the three months through June, while sales gained 3 percent, estimates show. The forecasts have decreased from the start of April, when analysts predicted a 7.3 percent jump in earnings and 3.7 percent sales increase.
Earnings for banks are forecast to fall 3.3 percent in the second quarter, according to data compiled by Bloomberg. It’s the only sector expected to see declining profits, the data show.
Goldman Sachs dropped 0.8 percent and JPMorgan Chase lost 0.8 percent as banks had the fourth-worst performance among 24 S&P 500 groups.
Eight of the 10 main groups in the S&P 500 retreated. Shares in energy producers and makers of consumer-discretionary products tumbled at least 0.9 percent to pace losses as investors shifted out of stocks whose performance is linked to economic growth.
Exxon Mobil Corp. retreated 1 percent to $102.57 as crude prices climbed after a nine-day losing streak. Chevron Corp. fell 0.9 percent to $130.25.
Home Depot sank 1.7 percent to $79.40 for the biggest decline in the Dow, while Lowe’s lost 1.4 percent to $47.20. Deutsche Bank’s Michael Baker lowered his earnings estimates for the two biggest U.S. home-improvement retailers by 1 cent a share each after Lumber Liquidators Holdings Inc. reported weaker-than-estimated results. Lumber Liquidators sank 22 percent to $55.25 for its biggest drop in three years.
Tractor Supply Co. lost 2.4 percent to $59.92. The farm-supplies retailer forecast second-quarter earnings below analysts estimates.
L Brands Inc. decreased 2.7 percent to $60.21. The owners of the Victoria’s Secret and Bath & Body Works chains reported that June sales rose 2 percent, falling short of the consensus analyst forecast of 2.7 percent.
Utility and phone shares rose at least 0.6 percent to lead advances Thursday, as investors shifted into sectors with high dividend-yielding stocks often favored in a risk-averse environment.
Verizon added 1.5 percent to $49.64 for the biggest rise in the Dow. The stock extended gains after Chief Executive Officer Lowell McAdam said on CNBC that Verizon was not interested in buying a satellite company.
Utilities yield 3.7 percent and phone stocks pay at 4.9 percent, the highest the S&P 500. The yield on benchmark 10-year Treasury notes fell one basis point, or 0.01 percentage point, to 2.54 percent.
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