NEW YORK - U.S. stocks declined, after benchmark indexes climbed to all-time highs Tuesday, as euro-area data showed slower-than-forecast inflation ahead of this week’s European Central Bank meeting.
Krispy Kreme Doughnuts Inc. dropped 14 percent after cutting its earnings forecast because of mounting costs and slow first-quarter sales. Quiksilver Inc. slumped 45 percent after the surfwear retailer posted a wider loss than analysts had predicted. Hillshire Brands Co. jumped 8.7 percent after confirming that Pilgrim’s Pride Corp. has increased its bid for the food producer.
The Standard & Poor’s 500 Index fell 0.2 percent to 1,921.25 at 10:53 a.m. in New York. The Dow Jones Industrial Average slipped 40.29 points, or 0.2 percent, to 16,703.34. Both gauges reached records yesterday. The Russell 2000 Index of smaller companies dropped 0.5 percent. Trading in S&P 500 companies was 14 percent below the 30-day average for this time of day.
“Traders are sitting on their hands, waiting for the response from the ECB before setting their bets up,” Chad Morganlander, a fund manager at Stifel Nicolaus & Co., which oversees $160 billion, said by phone from Florham Park, N.J. “There’s an overall anticipation that the ECB will be aggressive and that the jobs numbers on Friday will be better than expected.”
Data today showed euro-area inflation slowed more than economists forecast in May, cranking up pressure on the European Central Bank to deploy measures as soon as this week to kindle prices and drive growth.
With ECB President Mario Draghi warning about the risk of a negative price spiral, the Governing Council is considering measures from negative interest rates to conditional liquidity for banks. The central bank has prepared investors for the prospect of stimulus when it announces its rate decisions on June 5. “We are ready to act,” ECB Vice President Vitor Constancio said on May 30.
A Commerce Department report showed factory orders climbed 0.7 percent in April. Economists estimated a rise of 0.5 percent.
A release Wednesday may show companies added fewer workers in May, while the Labor Department’s report on Friday will probably show the unemployment rate remained near its lowest level since September 2008.
The S&P 500 has continued to climb to records even as the U.S. economy contracted for the first time in three years during the first quarter, amid optimism that a recovery is under way. Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll. Central-bank stimulus has helped propel the S&P 500 higher by as much as 184 percent from its bear-market low in March 2009.
The S&P 500 has rebounded 5.8 percent since a selloff in small-cap and Internet shares spread to the broader market, dragging the index to a two-month low in April. It advanced 2.1 percent in May for a fourth consecutive monthly increase. The measure trades at 16.3 times the projected earnings of its members, up from a multiple of 14.8 at the start of February.