Apple rally fades, US stocks decline on rate concerns
New York: US stocks fell, after the biggest drop in a month for the Standard & Poor’s 500 Index, as concerns grew that the Federal Reserve may raise interest rates sooner than anticipated and a rally in Apple Inc. disappeared.
Apple erased a rally of as much as 4.8% as it unveiled new products including larger-screen iPhones. McDonald’s Corp. retreated 1.5% as its monthly sales missed estimates. Home Depot Inc. lost 1.5% after confirming that hackers attacked its computer systems. Annie’s Inc. rallied 38% after General Mills Inc. agreed to buy the maker of organic and natural foods.
The S&P 500 fell 0.6% to 1,989.77 at 3:07pm in New York.
The Dow Jones Industrial Average lost 85.41 points, or 0.5%, to 17,026.01.
The Russell 2000 Index of smaller companies tumbled 1%.
Trading in S&P 500 companies was 9% above 30-day average.
“There are still a number of people who fear the Fed will raise rates too soon, but I don’t think there’s anything to be gained by being early in raising interest rates,”
John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “If the Fed tightens too soon, it will drag the US and the world into another recession.”
Fed Stimulus
The Fed is gauging the strength of the economy as it winds down a bond-buying program and considers the timing of raising rates.
Policy officials next meet on 16-17 September.
Assessments of strength of the economy are mixed. Gross domestic product (GDP) expanded more than previously forecast in the second quarter, propelled by gains in business investment, while a report on 5 September showed the economy added fewer jobs than anticipated in August.
Data this week will likely show a decline in weekly jobless claims and stronger retail sales, according to economists’ forecasts.
Rick Rieder, BlackRock Inc.’s chief investment officer of fundamental fixed income in New York, said in a report that an improving labour market and signs of inflation argue for the Fed to boost borrowing costs.
Meanwhile, former Fed chairman Alan Greenspan said the US economic rebound has been hindered by a slump in the construction industry as wage growth remains slow and credit conditions tight.
Strategist Targets
Wall Street strategists have been raising their targets for the S&P 500. Gina Martin Adams at Wells Fargo & Co. and Tony Dwyer, a strategist at Canaccord Genuity Securities Llc, were the latest on Tuesday to lift their forecasts for the S&P. They follow increased projections from Morgan Stanley and Deutsche Bank AG on Tuesday and a bullish rating on global stocks from Goldman Sachs Group Inc.’s portfolio strategy team.
The S&P 500 retreated 0.3% on Tuesday after a five-week rally, its longest winning streak this year. The benchmark is trading at 16.7 times the projected earnings of its members, near the 16.8 multiple reached on 5 September that was the highest valuation since the end of 2009, according to data compiled by Bloomberg.
The S&P 500 has not posted a move of more than 0.5% for 15 straight days, the longest stretch since February 1969, data compiled by Bloomberg show.
The last time the index fell more than 10% was three years ago.
Volatility Index
The Chicago Board Options Exchange Volatility Index, the gauge known as the VIX, climbed 4% to 13.16 on Tuesday. The gauge lost 29% last month, the biggest drop in almost three years.
All 10 groups in the S&P 500 dropped on Tuesday, with financial companies, utilities and phone shares losing more than 0.8%. Technology shares dropped 0.3%, reversing an earlier rally of 0.7%.
Apple fell 1.4% to $97.01, after climbing to within one point of its intraday record of $103.74 reached last week. The shares are up 20% so far this year, exceeding the 7.8% gain for the S&P 500.
The company announced the most wide-ranging set of product introductions under chief executive officer Tim Cook, who succeeded co-founder Steve Jobs in 2011. It unveiled Apple Watch, a line of watches with a rectangular face and rounded edges, with wristbands that can be swapped. The company also showed the new iPhone 6 and iPhone 6 Plus, which come in screen sizes of 4.7 inches and 5.5 inches, along with Apple Pay, which is designed to make iPhones into a digital wallet.
Amazon.com Inc. retreated 3% to $332.16. The company yesterday cut the price of its Fire smartphone to 99 cents to boost adoption of the device.
General Mills
Annie’s rallied 38% to $46.20. General Mills, the maker of Cheerios, Bisquick and Yoplait, will buy the company for about $820 million, gaining a popular line-up of natural and organic foods. General Mills dropped 0.4% to $53.32.
Morgan Stanley dropped 2.2% to $34.11 and Goldman Sachs Group Inc. lost 1.2% to $177.87. The Fed is planning risk-based capital standards for banks that are tougher than those developed by their international counterparts, Fed governor Daniel Tarullo told lawmakers on Tuesday.
McDonald’s dropped 1.5% to $91.13. The world’s largest restaurant chain said sales at stores open at least 13 months fell 3.7% in August as its US slump continued for the fourth straight month.
Pinnacle Foods Inc. declined 4.3% to $32.12. Shareholders affiliated to Blackstone Group LP will sell 15 million shares in the company, according to a statement late yesterday. Blackstone held a 51% stake in Pinnacle as of 30 June, according to data compiled by Bloomberg.
Avon Declines
Avon Products Inc. retreated 3.5% to $13.19. The company said on Monday that Kimberly Ross resigned as chief financial officer, effective from 2 October.
The cosmetics company has dropped 24% this year.
Home Depot lost 1.5% to $89.51 after it confirmed hackers attacked its computer systems at stores in the US and Canada. The company, which didn’t disclose how many customers may have been affected, said
the continuing investigation is focused on purchases made since April. Bloomberg
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