Jan. 23 (Bloomberg) -- U.S. stocks fell, with the Dow Jones Industrial Average tumbling to a one-month low, after a gauge of China’s manufacturing contracted and investors analyzed corporate earnings.
Cliffs Natural Resources Inc. slipped 4.3 percent, following European commodity producers lower. JPMorgan Chase & Co. and American Express Co. slid at least 1.9 percent to pace losses among financial firms. American Eagle Outfitters Inc. lost 7.8 percent after saying its chief executive officer is leaving. Netflix Inc. surged 16 percent as it projected customer growth that topped analysts’ estimates.
The Standard & Poor’s 500 Index declined 0.9 percent to 1,828.46 at 4 p.m. in New York. The Dow lost 175.99 points, or 1.1 percent, to 16,197.35. About 7.4 billion shares changed hands on U.S. exchanges, 22 percent above the three-month average.
“U.S. equities were at the intersection of full valuations and increasingly positive sentiment and that combination has made them vulnerable to less than perfect news,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, which oversees $63 billion, said in a phone interview. “We set the stage this morning with the data from China for the market to be a little bit nervous and the data points from the U.S. didn’t help to stem that anxiety.”
The S&P 500 has fallen 1.1 percent for the year while the Dow has tumbled 2.3 percent, after the broader gauge jumped 30 percent to a record last year, the most since 1997. Three rounds of Federal Reserve monetary stimulus have helped the S&P 500 rise 170 percent from a 12-year low in 2009.
The rally has boosted equity valuations to near the highest level since 2009. The S&P 500 trades at 15.5 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
Data today showed applications for U.S. unemployment benefits held near a six-week low, showing firings remain muted following the holidays. U.S. house prices advanced 0.1 percent in November from October, slowing growth that indicates the real estate recovery may be losing strength, the Federal Housing Finance Agency said in another report.
Separate releases indicated purchases of previously owned homes climbed in December for the first time in four months, while the index of U.S. leading indicators rose.
Fed officials have been scrutinizing economic data to determine the timing and pace of any reductions to their stimulus. The central bank, which next meets Jan. 28-29, decided at its December meeting to start cutting its monthly bond purchases by $10 billion to $75 billion.
In China, a report today indicated factory output may contract this month, based on a preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics.
“China has been the growth story for the better part of 10 or 15 years, and all of a sudden we’re starting to see contraction,” Chris Bouffard, chief investment officer of the Mutual Fund Store in Overland Park, Kansas, which oversees $8.5 billion, said in a phone interview. “That’s going to take a while for market participants to get comfortable with.”
The U.S. equities benchmark had gained 0.3 percent in the previous two sessions as investors assessed corporate earnings. Some 20 members of the index report results today, including Microsoft Corp. and McDonald’s Corp. Of the 109 index members that have released earnings so far this season, 74 percent have beaten estimates for profit and 67 percent have exceeded sales projections, according to data compiled by Bloomberg.
Per-share profit for companies in the index probably climbed 6 percent in the fourth quarter, while sales increased 2.2 percent, according to analysts surveyed by Bloomberg.
The Chicago Board Options Exchange Volatility Index rose 7.2 percent today to 13.77, the highest in three weeks. The gauge of S&P 500 options known as the VIX has gained 0.4 percent this year.
Nine of the 10 main groups in the S&P 500 retreated at least 0.3 percent today. Financial stocks dropped 1.7 percent, as JPMorgan Chase fell 1.9 percent to $56.47 and Citigroup Inc. slid 2.3 percent to $50.72. American Express lost 2.2 percent to $89.17 for the biggest loss in the Dow.
Berkshire Hathaway Inc. Class B shares fell 1.5 percent to $113.50. Regulators are starting to scrutinize Warren Buffett’s conglomerate to determine whether it is important enough to the financial system to require Fed supervision, according to two people with knowledge of the matter.
KeyCorp slid 3.3 percent to $13.68. The Cleveland-based bank today said noninterest expenses in the fourth quarter were $712 million, surpassing its guidance of $680 million to $700 million, including one-time charges. Profit rose 21 percent.
Materials producers declined 1.5 percent as a group after commodity stocks retreated in Europe. Prices for industrial metals sank as the manufacturing data from China, the world’s biggest consumer, fell below economists’ forecasts.
DuPont Co. fell 2 percent to $61.75. Alcoa Inc., the largest U.S. aluminum producer, dropped 1.2 percent to $12.07. Cliffs Natural Resources, the biggest U.S. iron-ore producer, dropped 4.3 percent to $20.29, the lowest since October.
Noble Corp. fell 8.6 percent to $33.13 for the steepest decline in the S&P 500. The oil driller said the offshore industry may be due for a cyclical pause. Diamond Offshore Drilling Inc. fell 5.2 percent to $51.88 and Rowan Cos. lost 2.6 percent to $32.78.
American Eagle Outfitters lost 7.8 percent to $13.19 after the teen-apparel retailer said Chief Executive Officer Robert Hanson is leaving the company and Executive Chairman Jay Schottenstein will replace him on an interim basis.
Herbalife Ltd. tumbled 10 percent to $65.92, a two-month low. The nutrition company that hedge fund manager Bill Ackman has accused of being a pyramid scheme fell the most in a year after a U.S. senator called for a probe into the company’s operations.
Zhone Technologies Inc. tumbled 26 percent to $4.62 after the provider of network products for voice, data and video services reported fourth-quarter revenue of $32.3 million, missing an estimate for $32.5 million.
Netflix surged 16 percent to $388.72. The world’s largest subscription streaming service forecast customer growth ahead of analysts’ estimates and saying it may charge new users more to share accounts.
Netflix predicted 2.25 million new domestic subscribers this quarter. The Los Gatos, California-based company also estimated first-quarter profit of $48 million, or 78 cents a share, compared with analysts’ projections of 75 cents.
AT&T Inc. gained 1.4 percent to $33.80 and Verizon Communications Inc. added 1.1 percent to $47.86, as phone stocks were the only group to advance in the S&P 500.
Union Pacific Corp. climbed 3.3 percent to $174.12. The biggest U.S. railroad reported fourth-quarter profit that beat analysts’ estimates after a record corn crop increased shipments of agricultural products. Shipments of automobiles and industrial products also rose.
McDonald’s rose 0.5 percent to $95.32. The world’s largest restaurant chain posted fourth-quarter profit that was little changed from a year earlier even as U.S. same-store sales fell amid shaky consumer confidence and increased competition.
--With assistance from Jonathan Morgan in Frankfurt. Editor: Jeremy Herron