U.S. stocks pullback for the first time in three days as Federal Reserve Chair Janet Yellen said the central bank’s stimulus program could expire this fall and standard interest rates could bolster six months later.
Boeing Co., Walt Disney Co. and General Electric Co. gave up at least 1.4 percent to lead the Dow Jones Industrial Average lower. Consolidated Edison Inc. led utilities to the largest pullback among 10 groups in the Standard & Poor’s 500 Index. Newmont Mining Corp. relinquished 3 percent as gold plunged down the most in six weeks after the Fed’s decision to trim down asset purchases.
The S&P 500 backslide 0.6 percent to 1,860.77 at 4 p.m. in New York. The Dow sagged down 114.02 points, or 0.7 percent, to 16,222.17. About 6.7 billion shares were traded in the U.S., in line with the three-month average.
“The pace of tightening, once the Fed starts tightening, is a little bit faster than thought before and I think that’s why we’re getting this market reaction,”John Canally, an economic strategist at LPL Financial Corp., said in a phone interview from Boston. His firm oversees about $438.4 billion. “Being reminded that the Fed will eventually raise rates is getting traders’ attention.”
By keeping its standard interest rate goal near zero and conducting three rounds of asset purchases, the Fed has helped push the S&P 500 up as much as 178 percent from a 12-year low as U.S. equities enter the sixth year of a bull market that started in March 2009.
Greater Rates
Stocks sagged down today as the Fed’s statement said officials forecast their interest rate goal would be 1 percent at the end of 2015 and 2.25 percent a year later, greater than estimated in the past, as they enhanced projections for hikes in the labor market. The central bank said it would slash its monthly bond purchases by $10 billion, to $55 billion.
Most Federal Open Market Committee participants reiterated their view that the Fed will stay away from boosting the benchmark interest rate until 2015. The median rate among 16 Fed officials rallied from December, when they projected the rate at the end of next year at 0.75 percent, and 1.75 percent for the end of 2016. The central bank said it will look at a vast amount of information in knowing when to increase its rate, giving a pledge tying borrowing costs to a 6.5 percent jobless rate.
Benchmark indexes continued declines as Yellen said the quantitative easing program would closed down this fall if the Fed continues to taper purchases in measured steps. She sees a “considerable time” between the end of the stimulus and the first rate hike, meaning “six months or that type of thing,” she said at her first press conference following a Fed finalization.
‘Risk Factor’
“U.S. indices are moving quickly on Yellen’s comments,” Larry Peruzzi, senior equity trader at Cabrerra Capital Markets LLC in Boston, said in an e-mail.
“Equities are adjusting the risk factor of higher rates.”
The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, spiked up 4.1 percent to 15.12 after two straight pullbacks. All of the 10 main industries in the S&P 500 slide lower with utility and industrial shares relinquishing at least 1 percent for the largest slump. Monetary firms depreciated less than 0.2 percent for the best performance.
Disney gave up 1.8 percent to $80.52, Boeing plunged 1.5 percent to $122.24 and GE tumbled 1.4 percent to $25.28 as 25 of 30 stocks in the Dow slump.
Newmont Mining backslide 3 percent to $24.50 for a third consecutive decrease. Gold for immediate delivery surrendered 1.9 percent to $1,330.35 an ounce as the Fed estimates for greater interest rates next year curbed demand for the metal as a store of value.
Con Ed
All 30 utilities in the S&P 500 pulled back as Treasury 10-year yields climbed 10 basis points to 2.77 percent, competing with the dividend yields offered by utilities. Con Ed missed 3.2 percent to $52.68 and Duke Energy Corp. plummeted 2.2 percent to $68.71.
SolarCity Corp. dive down 5.7 percent to $72.70. The largest U.S. solar-power supplier by market worth logged fourth-quarter net income of $26.7 million, compared with a loss of $33 million a year earlier. The earning came largely from an acquisition-related tax benefit, the firm declared. Excluding one-time items, SolarCity had a loss of 46 cents a share.
Nu Skin Enterprises Inc. relinquished 5.8 percent to $72.22. The skin-care product seller suspended some promotional meetings in China and won’t accept new applications for sales jobs there. The firm is being probed after a report in People’s Daily newspaper said it’s a “suspected illegal pyramid scheme.”
Juniper Advances
Juniper Networks Inc. boosted 2.1 percent to $26.45 after Wells Fargo Securities analyst Jess Lubert increased the firm’s rating to outperform from market perform.
The S&P 500 marched higher 1.7 percent in the last two days as Russia pledged not to look for territory beyond Crimea. The U.S. and Europe are preparing to ratchet up penalties on Russia after President Vladimir Putin signed an accord setting in motion Crimea’s accession to Russia. With visa bans and asset freezes on Russian officials failing to sway Putin, European Union leaders will meet tomorrow to consider “additional and far-reaching consequences.”
Investors have bolstered $8 billion to U.S. equity exchange-traded funds in the past five days and $1.1 billion to bond ETFs, data gathered by Bloomberg show. Materials stocks absorbed the most money among industry ETFs, taking in $689 million during the past week.
