U.S. stocks were little changed, following all-time highs for
benchmark indexes yesterday, as investors awaited a European Central
Bank decision on stimulus measures and a report on American employment
in May.
Krispy Kreme Doughnuts Inc. dropped 15 percent after
cutting its earnings forecast because of mounting costs and slow
first-quarter sales. Quiksilver Inc. slumped 41 percent after the
surfwear retailer posted a wider loss than analysts had predicted.
Hillshire Brands Co. jumped 9.5 percent after confirming that Pilgrim’s
Pride Corp. has increased its bid for the food producer.
The
Standard & Poor’s 500 Index fell
less than 0.1 percent to 1,924.24 at 4 p.m. in New York. The Dow Jones
Industrial Average slipped 21.29 points, or 0.1 percent, to 16,722.34.
Both gauges reached records yesterday. The Russell 2000 Index of smaller
companies dropped 0.2 percent. About 5.2 billion shares changed hands
today on U.S. exchanges, 18 percent below the three-month average.
“Traders
are sitting on their hands, waiting for the response from the ECB
before setting their bets up,” Chad Morganlander, a fund manager at
Stifel Nicolaus & Co., which oversees $160 billion, said by phone
from Florham Park, New Jersey. “There’s an overall anticipation that the
ECB will be aggressive and that the jobs numbers on Friday will be
better than expected.”
Data today showed euro-area inflation
slowed more than economists forecast in May, cranking up pressure on the
ECB to deploy measures as soon as this week to kindle prices and drive
growth. With ECB President Mario Draghi warning about the risk of a
negative price spiral, the Governing Council is considering measures
from negative interest rates to conditional liquidity for banks.
ECB Stimulus
Draghi
is likely to signal that any interest-rate cut won’t necessarily be the
final one, according to two euro-area central bank officials. The ECB
president will probably reiterate his commitment to keep borrowing costs
at present or lower levels, the people said, asking not to be
identified because the talks aren’t public. While a final decision won’t
be made until June 5, policy makers are debating a cut of 10 or 15
basis points in both the benchmark and deposit rates, the people said.
A Commerce Department report showed U.S.
factory orders climbed 0.7 percent in April. Economists estimated a rise of 0.5 percent.
A
release tomorrow may show companies added fewer workers in May, while
the Labor Department’s report on Friday will probably show the
unemployment rate remained near its lowest level since September 2008.
Set Positions
“Between
the ECB on Thursday and the non-farm payroll on Friday, people are
pretty much set in their positioning,” Rick Fier, director of equity
trading at Conifer Securities LLC in New York, said a phone interview.
“We’ve been having a nice run and we’re down small. There’s nothing
that’s going to happen before Thursday that’s going to get people to
change one way or the other.”
The S&P 500 has continued to
climb to records even as the U.S. economy contracted for the first time
in three years during the first quarter, amid optimism that a recovery
is under way. Federal Reserve policy makers said at their April meeting
that the economy has strengthened after adverse weather took its toll.
Central-bank stimulus has helped propel the S&P 500 higher by as
much as
184 percent from its bear-market low in March 2009.
Profit Growth
The S&P 500 has rebounded 6 percent
since
a selloff in small-cap and Internet shares spread to the broader
market, dragging the index to a two-month low in April. It advanced 2.1
percent in May for a fourth consecutive monthly increase. The measure
trades at 16.3 times the projected earnings of its members, up from a multiple of 14.8 at the start of February.
Analysts
predict that profit for S&P 500-listed companies will increase 7.5
percent this year, while sales will climb 3.3 percent, according to
estimates compiled by Bloomberg.
“The market bounces back and
forth, but fundamentally nothing much has changed,” Ivo Weinoehrl, a
fund manager at Deutsche Asset & Wealth Management, said by
telephone from
Frankfurt.
“The economy is definitely improving after a disappointing first
quarter, and we’re still expecting earnings growth of 7 to 8 percent.
We’re in a stable environment, but it’s nothing to get excited about and
I don’t see the real pick-up coming through just yet.”
The
Chicago Board Options Exchange Volatility Index rose 2.5 percent to
11.87 today. The gauge of U.S. equity volatility known as the
VIX (VIX) dropped to 11.36 on May 23, its lowest level since March 2013.
Six out of 10
major industries in the S&P 500 declined, with phone, consumer-staples and raw-materials companies dropping the most.
Krispy Kreme
Krispy
Kreme dropped 15 percent to $16.19 after predicting earnings of 69
cents to 74 cents a share for the current financial year. It had
forecast as much as 79 cents. Costs related to executive compensation
and new business management software exceeded its estimates, according
to a statement. First-quarter sales rose 0.8 percent to $121.6 million,
less than the $125.8 million estimated by analysts.
Quiksilver (ZQK)
tumbled 41 percent, its biggest slide ever, to $3.41. The company
posted an adjusted loss of 15 cents a share in the fiscal second
quarter, wider than the 2-cent loss projected by analysts. Sales of $408
million missed estimates by about $40 million. Quiksilver predicted
that sales in North America and Europe would drop during the six months
through October.
Casino companies declined as May revenue from
Macau rose 9.3 percent, falling short of the average analyst estimate
for growth of 14.5 percent. Wynn Resorts Ltd. and Las Vegas Sands Corp.
decreased more than 2.6 percent.
Hillshire Deal
Hillshire
rallied 9.5 percent to $58.65. The maker of Jimmy Dean sausages and
Ball Park hot dogs said it will hold talks with Pilgrim’s Pride and
rival bidder Tyson Foods Inc. after the former raised its offer to $55 a
share from $45. Tyson, which fell 3 percent to $42.08 today, offered
$50 a share last week.
Pilgrim’s Pride slid 2.2 percent to $25.34.
Applied
Materials Inc. increased 4.4 percent to $21.42, the highest since 2008.
Jefferies & Co. initiated coverage yesterday on the largest
supplier of semiconductor-manufacturing equipment, rating it a buy with a
price target of $28.
Dollar General Corp. rose 3.9 percent to
$56.41. The discount retailer said in a conference call that it plans to
spend $1.1 billion on share buybacks. The company earlier reported
quarterly earnings that fell short of analyst estimates.
The views and opinions expressed herein are the author’s own, and do not necessarily reflect of
