US Stocks Decline as Lowe's, Target Slump Before Fed Minutes

Wednesday, 20 Aug 2014 10:27 AM

 

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U.S. stocks dropped, after the Standard & Poor’s 500 Index climbed toward a record yesterday, as companies from Lowe’s Cos. to Target Corp. fell amid weaker forecasts and investors awaited minutes from the Federal Reserve’s last meeting.

Target lost 1.6 percent after reducing its earnings outlook as slumping sales and a money-losing push into Canada take a toll on profit. Lowe’s fell 3.1 percent after trimming its revenue projection for this year. Hertz Global Holdings Inc. slumped 13 percent after saying its full-year results will miss the low end of its forecast.

The S&P 500 slipped 0.2 percent to 1,978.67 at 9:31 a.m. in New York.

“There’s some resistance with trading at key levels in the S&P near July highs, Fed minutes coming out and the start of the central banker meeting in Jackson Hole,” Todd Salamone, senior vice president of research at Cincinnati-based Schaeffer’s Investment Research, said in a phone interview. “If something comes out from Yellen in terms of raising rates sooner than expected, that could impact markets in a negative manner.”

The S&P 500 is within 0.3 percent of an all-time high reached July 24 amid bets that the Fed will leave interest rates near zero for longer even as economic growth shows signs of accelerating.

The central bank releases minutes from its July 29-30 meeting at 2 p.m. in Washington. At that gathering, the central bank cut bond purchases by $10 billion for a sixth time, leaving it on track to end in October.

Jackson Hole

The annual Fed Bank of Kansas City’s economic symposium starts tomorrow in Jackson Hole, Wyoming. Fed Chair Janet Yellen and European Central Bank President Mario Draghi will discuss their outlook for the economy and monetary policy on Aug. 22.

“Fed minutes reaffirming confidence is what we are looking for,” Justin Urquhart Stewart, who helps oversee about $7 billion at Seven Investment Management LLP in London, wrote in an e-mail. “What we don’t want to see is any significant movement up or down, but rather something showing continued steady growth in the economy.”

Three rounds of Fed stimulus and better-than-estimated corporate earnings have sent the S&P 500 higher by as much as 194 percent from its bear-market low on March 2009. The gauge has not had a decline of 10 percent in almost three years. The S&P 500 is trading at 17.8 times the reported earnings of its companies, near the highest level since 2010.

Hewlett-Packard Co. and Staples Inc. are among the six S&P 500 companies reporting earnings today. Stocks rallied yesterday as retailers including Home Depot Inc. and TJX Cos. led gains on better-than-projected results.

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