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Business News/ Market / Stock-market-news/  US stocks fall from records as health-care, technology slump
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US stocks fall from records as health-care, technology slump

Economic reports this week may give clues on when the Federal Reserve may increase its benchmark interest rate

The S&P declined 0.4% to 2,108.90 in New York, and the Dow Jones lost 73.55 points to 18,215.08. Photo: AFP (AFP)Premium
The S&P declined 0.4% to 2,108.90 in New York, and the Dow Jones lost 73.55 points to 18,215.08. Photo: AFP
(AFP)

New York: US stocks retreated after the Nasdaq Composite Index closed above 5,000 for the first time in 15 years, as health-care and technology companies slid.

Health-care companies in the Standard & Poor’s 500 Index lost 0.9%, after reaching an all-time high Monday. Alibaba Group Holding Ltd. fell to the lowest since it began trading in September. Ford Motor Co. slipped 2.1% after a drop in February light-vehicle sales.

The S&P 500 declined 0.4% to 2,108.90 at 2:29 pm in New York, and the Dow Jones Industrial Average lost 73.55 points, or 0.4%, to 18,215.08. Both gauges closed at records Monday. The Nasdaq Composite fell 0.5%. Trading in S&P 500 companies was 14% below the 30-day average.

“The biggest thing is we’re at the record highs and a lot of people, at the margin, are taking profits," Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $338 billion, said by phone. “The sectors getting hit today are the big momentum sectors: consumer cyclicals, health care and technology."

The Nasdaq Composite is 1.3% from a record reached in 2000. It has taken two bull markets and more than 4,500 days for the Nasdaq to get close to making up all the ground lost in the dot-com collapse. The index surged 7.1% in February, its best month since 2012.

The S&P 500 rose to fresh records four times in February, while the Dow average climbed 5.6% for its best month since January 2013. The index also topped its record from December for the first time in 2015.

ECB stimulus

Economic reports this week may give clues on when the Federal Reserve may increase its benchmark interest rate. Data may show factory orders rose in January after slipping the previous month, while payrolls climbed in February as the unemployment rate fell, economists forecast.

Investors are also awaiting details of the European Central Bank’s debt-purchase program on Thursday. ECB President Mario Draghi in January announced a €1.1 trillion ($1.2 trillion) quantitative-easing plan to counter slowing growth and the threat of deflation.

“This week is very much about the ECB and the jobs report," said Witold Bahrke, an asset-allocation strategist at Nomura International Plc in London. “We had a very strong run in the recent week. It’s only natural that people will step a bit more into the sidelines, especially when you’re heading into these big events at the end of the week when we could see larger moves."

Health-care slides

Costco Wholesale Corp. and Staples Inc. are among S&P 500 companies reporting later this week. Some 98% of companies have released earnings, with 74% of those beating projections and 56% topping sales estimates.

Analysts predict profit at S&P 500 companies will drop 4.9% in the current quarter after a 4.6% increase in the final three months of 2014, data compiled by Bloomberg show.

Eight of 10 main industries in the S&P 500 declined, led by a 0.9% drop in health-care. The group climbed 4.1% in February and reached a record Monday. The Nasdaq Biotechnology Index dropped 0.9% Tuesday.

Micron Technology Inc. lost 5%, leading semiconductor companies lower after Nomura Securities International Inc. analyst Romit Shah cut Micron’s rating to neutral from buy and reduced his price target to $30. Applied Materials Inc. and Lam Research Corp. fell more than 2.7%.

Transports fall

The Dow Jones Transportation Average slipped 0.6% for the fourth decline in five sessions, with railroads Norfolk Southern Corp., CSX Corp. and Union Pacific Corp. down at least 1.5%.

Alibaba Group Holding Ltd. tumbled 3.6% to the lowest since it began trading in September, after rival online retailer JD.Com Inc. reported better-than-projected earnings, fueling concern that Alibaba’s sales growth may be slowing. The company is also working to keep operating in Taiwan after being told to leave after alleged investment violations.

Automobile stocks slid as Ford Motor said February light- vehicle sales slipped 2% after analysts projected an increase. General Motors Co.’s sales increase missed estimates as cold weather slowed showroom traffic. Ford fell 2.1%, and parts maker Delphi Automotive Plc lost 0.6%.

Energy stocks in the S&P 500 added 0.6% as oil rallied 1.7%. Valero Energy Corp., Pioneer Resources Co. and Denbury Resources Inc. climbed at least 2.1%.

The Chicago Board Options Exchange Volatility Index rose 6.4% to 13.87. The gauge, know as the VIX, lost 36% in February for its biggest monthly drop on record.

Stock buybacks

Best Buy Co. rose 1.1%. The world’s largest electronics chain said it will offer a special dividend of 51 cents a share, or $180 million, and increase its quarterly payout 21% to 23 cents. The company also said it will repurchase $1 billion in shares over the next three years.

Stock buybacks vaulted to a record in February, with chief executive officers announcing $104.3 billion in planned repurchases. That’s the most since TrimTabs Investment Research began tracking the data in 1995 and almost twice the $55 billion bought a year earlier.

Companies in the S&P 500 have spent more than $2 trillion on their own stock since 2009, underpinning an equity rally in which the index has more than tripled. They were on pace to spend a sum equal to 95% of their earnings on repurchases and dividends in 2014, data compiled in October showed. Bloomberg

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Published: 03 Mar 2015, 08:43 PM IST
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