U.S. Stocks Fluctuate After S&P 500’s Biggest Drop Since October

LONDON – U.S. stocks fluctuated, after the biggest drop since October in the Standard & Poor’s 500 Index, as data showed service industries expanded at the slowest pace in six months and factory orders fell.

The S&P 500 added less than 0.1 percent to 2,020.91 at 10:07 a.m. in New York. The Dow Jones Industrial Average increased 9.9 points, or 0.1 percent, to 17,511.55 today. The Russell 2000 Index slipped 0.4 percent. Trading in S&P 500 companies was 11 percent above the 30-day average for this time of the day.

“It’s a balancing act between bulls and bears,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, said. “Many investors are playing the recovery scenario and will buy on setbacks, but others get nervous after a strong rally. The U.S. economy will have a strong first quarter and this should help stocks rise, but we will have higher volatility.”

The S&P 500 yesterday lost 1.8 percent, completing its first four-day decline since 2013 and sliding below its average price for the last 50 days.

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The benchmark gauge dropped as much as 3.4 percent since an all-time high reached Dec. 29. The S&P 500 posted its first December decline since 2007, trimming its annual increase to 11 percent. Strategists are calling for an 8.5 percent gain this year.

Oil prices extended their drop below $50 a barrel today, for a fourth day of losses, amid forecasts that U.S. crude inventories will expand. Oil lost almost half its value in 2014 as competing producers resisted calls to cut output, exacerbating a global supply glut. Energy companies in the S&P 500 retreated 10 percent in 2014, the most among 10 industry groups.

“The baseline for global growth is improving and lower oil is a positive for this, but at the same time risks are increasing,” said von Mehren. “We don’t know where the breaking point is, where the oil price gets so low it triggers a financial crisis somewhere that could then spread.”

Economic reports

Data today showed factory orders declined in November. Service industries expanded in December at the slowest pace in six months, indicating the biggest part of the U.S. economy cooled as the year drew to a close. The Institute for Supply Management’s non-manufacturing index fell to 56.2 from a November reading of 59.3 that was the second-strongest since 2005, the Tempe, Ariz.-based group’s report showed today.

Reports on U.S. hiring are also due this week. The Federal Reserve tomorrow releases the minutes from its last policy meeting at which it pledged patience in raising interest rates even as the economy expands.

Investors later this month will evaluate corporate earnings reports to help gauge equity valuations. Alcoa Inc. unofficially starts the earnings season when it reports fourth-quarter results on Jan. 12. Profit at S&P 500 companies probably climbed 2.4 percent in the period, analysts predicted.

The Chicago Board Options Exchange Volatility Index, a measure of demand for options on the S&P 500, increased 1.6 percent to 20.24 today.

Six out the 10 major industries in the S&P 500 advanced, led by utilities and health-care shares. Industrial and financial companies declined.

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