U.S. Stocks Decline as Financial, Technology Shares Lead Drop

Mar 27, 2014 4:37 pm ET

March 27 (Bloomberg) -- U.S. stocks fell for the fourth time in five days, led by banks and technology companies, as investors resumed a rotation out of the bull market’s biggest winners.

Citigroup Inc. dropped the most since 2012 after its capital plan failed Federal Reserve stress tests. Accenture Plc fell 5 percent after saying it anticipates a continued “challenging” environment for its business. GameStop Corp. lost 4 percent after its earnings forecast trailed analysts’ estimates. Baxter International Inc. jumped 3.9 percent after announcing plans to split into two companies. Alcoa Inc. rallied 6.2 percent to the highest since 2011.

The Standard & Poor’s 500 Index declined 0.2 percent to 1,849.04 at 4 p.m. in New York, trimming a loss of as much as 0.6 percent. The Dow Jones Industrial Average fell 4.76 points, or less than 0.1 percent, to 16,264.23. The Nasdaq Composite Index sank 0.5 percent to the lowest since Feb. 10.

“People are reducing their risk portfolios a little bit,” John Fox, director of research at Fenimore Asset Management in Cobleskill, New York, said by phone. The firm oversees about $1.9 billion. “Some of the speculative parts of the market have been selling off. If you own a stock and the reason you own it is it’s going up and it stops going up, there’s no reason to own it.”

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility also known as VIX, slid 2.1 percent to 14.62. About 7.2 billion shares changed hands on U.S. exchanges, 6 percent more than the three-month average.

Biggest Losers

Today’s drop left the S&P 500 unchanged for the year. Losses this month have been steepest in U.S. stocks that led the five-year-old bull market, with consumer discretionary companies falling 4.3 percent after quadrupling since March 2009.

The Nasdaq Biotechnology Index, up 304 percent in the last five years, has fallen 11 percent since the end of February, while the Russell 2000 gauge of smaller companies has slipped 2.7 percent after rallying more than 230 percent.

Some of the biggest losses have occurred in technology companies that sold shares to the public in the last few years. Facebook Inc. has slipped 11 percent in March, while Yelp Inc. decreased 17 percent, Twitter Inc. declined 16 percent and Pandora Inc. dropped 20 percent. The Dow Jones Internet Composite Index of 40 companies has lost 8.5 percent this month.

Since reaching a 13-year high on March 5, the Nasdaq Composite has fallen 4.7 percent. Illumina Inc., Netflix Inc., Tesla Motors Inc. and TripAdvisor Inc. are all down at least 15 percent over that period.

Ukraine Crisis

The S&P 500 yesterday slid 0.7 percent after President Barack Obama warned that the crisis in Ukraine may escalate. The U.S. Senate and House passed separate bills today imposing additional sanctions on Russian officials for the nation’s annexation of Crimea.

Applications for unemployment benefits unexpectedly declined last week to an almost four-month low, a sign companies are confident in the outlook for demand, data today showed. Gross domestic product grew at a 2.6 percent annualized rate from October through December, less than the 2.7 percent median forecast of 79 economists surveyed by Bloomberg.

Contracts to purchase previously owned U.S. homes unexpectedly fell in February for an eighth straight month, a sign of further weakness in the industry.

“The numbers were neutral from an investors’ standpoint,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said by phone. “There was no huge, market-moving information. GDP was slightly below, while claims numbers were a little bit more of a positive. It looks like we’re trending in the right direction from an economic standpoint.”

ETF Flows

Investors have removed $6 billion from U.S. equity exchange-traded funds in the past five days and added $555 million to bond ETFs, data compiled by Bloomberg show. Health- care stocks saw the most money removed among industry ETFs, losing $991 million during the past week.

Financial companies fell 0.6 percent for the second-worst performance among 10 S&P 500 industries after technology stocks. The KBW Bank Index declined 1.3 percent even as lenders announced more than $60 billion of dividends and share buybacks after the Fed approved capital plans for 25 of the 30 banks in its annual stress tests.

Citigroup lost 5.4 percent to $47.45. The bank failed to win approval to raise its dividend to 5 cents a share and put in place a $6.4 billion buyback. The Fed expressed concern about the lender’s ability to project losses in parts of its global operations and to reflect all business exposures in its internal stress test.

Accenture, GameStop

Accenture slumped 5 percent, the most since June, to $78.80. The world’s second-largest technology consulting company said eastern Europe adds to uncertainty even as it raised its full-year earnings projections.

GameStop dropped 4 percent to $37.33. The video-game retailer forecast full-year profit that trailed analysts’ estimates and said it will cut the number of its video-game stores by about 2 percent after last quarter’s sales fell short.

Baxter International jumped 3.9 percent to $72.80. The maker of hemophilia treatments will split into two companies, one focused on developing biotechnology and pharmaceutical medicines and one that sells medical products.

Alcoa surged 6.2 percent to $12.59, the highest since 2011. A U.K. ruling against London Metal Exchange’s pending warehousing changes is positive for the largest U.S. aluminum producer, according to Sterne, Agee & Leach Inc.

Verizon Communications Inc. and AT&T Inc. rose at least 1 percent to lead an index of phone stocks to the biggest gain in the S&P 500.

Exxon Mobil Corp. jumped 1.6 percent to $96.24 for the steepest climb in the Dow as oil rose to a two-week high on supply concerns.

--With assistance from Namitha Jagadeesh in London and Joseph Ciolli in New York.