US stocks declined, halting the Standard & Poor's 500 Index's longest winning streak since September, after disappointing earnings reports from AT&T and Amgen and an unexpected drop in home sales.
The S&P 500 fell 0.2 per cent to 1,875.39 at 4pm. in New York. The Dow Jones Industrial Average slipped 12.52 points, or 0.1 per cent, to 16,501.85. The Nasdaq 100 Index of technology stocks lost 0.9 per cent.
"The market has been moving up rather well, but it can get a little tired," Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $US2 billion, said in a phone interview. "And the economic news today was not anything that would drive the market higher at this point. Apple and Facebook report after the close today, and everyone will be watching that, as they can be market movers."
The US equity benchmark gauge advanced 3.5 per cent during its six-day rally, closing 0.6 per cent below a record high, as earnings from Netflix to Citigroup Inc. topped estimates and Federal Reserve Chair Janet Yellen reiterated the bank's commitment to supporting the economy.
Commerce Department data today showed that sales of new homes unexpectedly plunged in March to the lowest level in eight months, reflecting a broad-based retreat that signals the industry is facing bigger challenges than just bad weather. Sales dropped 14.5 per cent to a 384,000 annualized pace. Economists predicted a 450,000 annualised pace.
Factory Data
A report from Markit Economics showed a preliminary US manufacturing index decreased to 55.4 in April from a final reading of 55.5 a month earlier. The median forecast in a Bloomberg survey of economists was 56. Readings greater than 50 signal expansion.
Emerging-market equities dropped and European shares snapped the biggest three-day rally since June after the Markit gauge for China signaled continuing weakness in the world's second-largest economy.
The S&P 500's six-day rally damped volatility, as the Chicago Board Options Exchange Volatility Index fell in each of the sessions to the lowest since April 2. The gauge known as the VIX added 1.4 per cent to 13.38 today.
Of the 134 companies in the S&P 500 that have released earnings this season, 75 per cent have exceeded analysts' profit estimates, while 51 per cent beat sales projections, according to data compiled by Bloomberg.
Apple Inc., the world's largest company by market value, Facebook Inc. and Qualcomm Inc. are among 41 index members reporting earnings today. Profit for S&P 500 companies probably increased 0.7 per cent in the first quarter, analysts estimated. They had predicted a 6.6 per cent gain at the beginning of this year.
Tech Bubble
"These next few days are the most important of the earnings season as some big bellwethers report," Heinz-Gerd Sonnenschein, an equity market strategist at Deutsche Postbank AG, said by phone from Bonn, Germany. "Earnings have not been great this quarter. Expectations had already been brought down quite dramatically and profit growth is weak year-on-year. The S&P 500 is holding up, but investors will need more of a signal to start buying into the market."
Apple shares have sunk 6.5 per cent this year as the company is testing Wall Street's patience with its slowing iPhone and iPad sales. Revenue is projected to be flat for the first time in at least a decade, according to data compiled by Bloomberg. Profit is also estimated to decline 5 per cent, making it the sixth consecutive period with little to no gains.
Greenlight Capital Inc., the $US10.3 billion hedge-fund firm run by David Einhorn, said it was betting against a group of technology stocks as evidence grows of a bubble.
"There is a clear consensus that we are witnessing our second tech bubble in 15 years," the New York-based firm said in a letter to clients yesterday. "The current bubble is an echo of the previous tech bubble with fewer larger capitalization stocks and much less public enthusiasm."
Discovery Capital Management LLC, the $US15 billion macro- economic hedge-fund firm run by Robert Citrone, slumped in April to bring its losses this year to 12 per cent, according to an e- mail the firm sent to investors.
Discovery has struggled in 2014 after predicting at the start of the year that a crisis in emerging markets would worsen and shares of technology companies would rise, according to a 2014 outlook letter to clients, a copy of which was obtained by Bloomberg News.
Bloomberg
