U.S. stocks decline before Federal Reserve policy statement

U.S. stocks fell, after the Standard & Poor’s 500 Index approached a record high, as investors awaited a Federal Reserve announcement on the prospects for monetary stimulus. More

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U.S. stocks decline before Federal Reserve policy statement

BLOOMBERG NEWS FILE PHOTO/JIN LEE
U.S. STOCKS FELL TODAY in anticipation of a policy statement at 2 p.m. Wednesday from the Federal Open Market Committee including its forecasts for economic growth, inflation and unemployment.
Posted 9/18/13

NEW YORK - U.S. stocks fell, after the Standard & Poor’s 500 Index approached a record high, as investors awaited a Federal Reserve announcement on the prospects for monetary stimulus.

UnitedHealth Group Inc. and WellPoint Inc. dropped more than 2.5 percent to pace declines among health-care companies. Adobe Systems Inc. rallied 7.3 percent as the largest maker of graphic-design tools said it amassed more than 1 million customers for its online services. FedEx Corp. rose 2.8 percent after earnings topped estimates as the operator of the world’s largest cargo airline reduced costs.

The S&P 500 fell 0.2 percent to 1,701.28 at 12:43 p.m. in New York. The benchmark index climbed yesterday to within five points of its all-time high of 1,709.67 reached on Aug. 2. The Dow Jones Industrial Average declined 49.50 points, or 0.3 percent, to 15,480.23 today. Trading in S&P 500 stocks was 11 percent below the 30-day average at this time of day.

“The Fed has done a very good job calibrating expectations,” Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management, which oversees $22 billion, said by phone. “The market ought to welcome the removal of the uncertainty. The reason the Fed believes it has the ability to start tapering monetary policy and eventually start raising interest rates is because economic activity is more durable.”

The Federal Open Market Committee wraps up a two-day policy meeting today. Analysts are divided on the amount by which the Fed will scale back its monthly asset purchases. Among 64 economists surveyed by Bloomberg News, 33 predict it will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.

Stimulus program

The central bank’s stimulus program has helped the S&P 500 rally more than 150 percent from its March 2009 low. Speculation over the future of quantitative easing has whipsawed global asset prices since May, when Chairman Ben S. Bernanke first signaled cuts may start in 2013. The S&P 500 tumbled 5.8 percent from a record on May 21 through June 24. It rebounded 8.7 percent to close at its latest record last month, then slumped as much as 4.6 percent before climbing again.

The FOMC releases both its policy statement and forecasts for economic growth, inflation and unemployment at 2 p.m. Washington time. Bernanke will hold a press conference half an hour later.

Housing starts rose 0.9 percent to a 891,000 annual rate, following the prior month’s 883,000 pace that was weaker than previously estimated, a Commerce Department report showed today in Washington. The median estimate of 83 economists surveyed by Bloomberg called for 917,000. Permits dropped 3.8 percent to a 918,000 pace, showing little momentum heading into this month.

Volatility index

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 1 percent to 14.68. The equity volatility gauge has tumbled 14 percent in September after rallying 26 percent in August, the biggest monthly gain since May 2012.

Seven out of 10 groups in the S&P 500 fell, as shares of phone companies lost 1 percent to lead declines. Health-care stocks slipped 0.6 percent as a group. WellPoint Inc. lost 2.7 percent to $85.91 and and HealthNet fell 1.5 percent to $33.12.

JPMorgan Chase & Co. analyst Justin Lake said the two companies would be most affected by any delay in the start of open enrollment in new health-care exchanges mandated by the Affordable Care Act. The analyst said the Centers for Medicare & Medicaid Services could announce a delay to the planned Oct. 1 enrollment start as soon as today.

UnitedHealth lost 2.5 percent to $72.46, for the largest decline in the Dow.

Cracker Barrel

Cracker Barrel Old Country Store Inc. fell 4.4 percent to $102.30. The restaurant chain forecast 2014 sales of $2.7 billion to $2.75 billion. Analysts estimate annual revenue of $2.75 billion.

NRG Energy Inc. lost 2.3 percent to $27.29. The wholesale power company was downgraded to neutral from buy at Goldman Sachs Group Inc.

Raw-material producers and technology companies had the biggest gains, rising at least 0.2 percent. Cliffs Natural Resources Inc. gained 2.4 percent to $22.98 and Apple Inc. jumped 1.5 percent to $462.03.

Adobe climbed 7.3 percent to $51.67. The number of Web subscribers jumped 47 percent in the fiscal third quarter, even as sales and profit declined.

Internet services

The results are validating the strategy of CEO Shantanu Narayen to push the maker of Photoshop and Illustrator software deeper into Internet services. While that’s crimping near-term revenue and profit, the transition to a suite of online tools called Creative Cloud positions Adobe for more predictable growth in the future, according to Josh Olson, an analyst at Edward Jones & Co.

FedEx rallied 2.8 percent to $113.80. The company, regarded as an economic bellwether because of the variety of goods it ships globally, began taking steps last year to reduce costs by $1.7 billion as customers opt for cheaper shipping. FedEx is parking older planes sooner, trimming capacity to Asia and eliminating 3,600 jobs through buyouts.

Dollar Tree Inc. added 2.2 percent to $57.07. The discount- store operator said its board authorized $2 billion in equity repurchases. The Chesapeake, Va.-based company also said it agreed with JPMorgan Chase & Co. to buy back $1 billion in shares under a variable maturity accelerated program.

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