Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from near a record, as energy companies slumped after oil reached a three-year low and forecasts from Sprint Corp. to Priceline Group Inc. disappointed investors.
Exxon Mobil Corp. and Chevron Corp. paced losses in energy shares as oil sank to as low as $75.84 a barrel in New York. Sprint tumbled 17 percent as the wireless carrier lost subscribers for an 11th straight quarter. Priceline slid 8.4 percent on a weaker-than-projected sales forecast.
The Standard & Poor’s 500 Index fell 0.3 percent to 2,012 at 4 p.m. in New York as investors also await election results to see if Republicans wrest control of the Senate. The Dow Jones Industrial Average rose 16.51 points, or 0.1 percent, to 17,382.75 as Procter & Gamble Co. and Wal-Mart Stores Inc. led gains. Trading in S&P 500 companies was 5 percent below the 30- day average at this time of the day.
“Look at the price of oil way down. That tells you everything you need to know,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “There might be some important things that come out of the election, but none of them will be bigger than the momentum from earnings and the impact that the price of oil will have on market sentiment.”
The S&P 500 rebounded 8.3 percent from a six-month low on Oct. 15 through yesterday, fueled by better-than-forecast economic data and improving earnings reports. The gain has pushed the index to trade at 16.7 times the members’ projected profit, near its highest multiple since 2009. Both the S&P 500 and the Dow closed at all-time highs last week amid optimism the Bank of Japan’s stimulus will fill some of the gap left by the end of Federal Reserve bond buying.
Republican Chances
Republicans are poised to make gains in U.S. elections today, though several races remain tight and it’s too close to call yet whether the party will capture enough seats to seize control of the Senate. In the House, Republicans appeared likely to expand their majority. The Senate is the question, with Republicans looking to pick up a net gain of six seats.
Investors will also be looking for evidence that the world’s largest economy can sustain a withdrawal in central-bank stimulus. A Commerce Department report showed factory orders slipped 0.6 percent in September, matching economists’ forecasts.
Economic Data
Other data today showed the trade deficit in the U.S. widened in September as exports cooled from a record, highlighting how weakening global growth will affect the American economy. The gap grew by 7.6 percent to $43 billion, the largest since May.
Concern over the global economy intensified as the European Commission cut its growth forecast for the euro area and said inflation will be even weaker than the European Central Bank predicts. The ECB meets Nov. 6 to deliberate on monetary policy amid increasing the pressure for the central bank to consider additional stimulus.
Paul Singer’s Elliott Management Corp. said optimism on U.S. growth is misguided as economic data understate inflation and overstate growth, and central bank policies of the past six years aren’t sustainable.
‘Coming Attractions’
The market turmoil in the first half of October may be a “coming attractions” for the next real crash that could turn into a “deep financial crisis” if investors lose confidence in the effectiveness of monetary stimulus, Elliott wrote in a third-quarter letter to investors, a copy of which was obtained by Bloomberg News.
Fed Bank of St. Louis President James Bullard said a drop in oil is bullish for the economy. He said in an interview on Fox Business Network that he’s looking for a fairly robust economy in the fourth quarter.
About three stocks declined for every two that rose in the U.S. The Russell 2000 Index of smaller companies lost 0.4 percent. Energy shares sank 2 percent as a group for the biggest drop among the 10 main industries in the S&P 500.
Exxon Mobil slid 0.8 percent and Chevron fell 1.3 percent as 38 of 43 energy companies in the S&P 500 retreated. West Texas Intermediate crude slid for a fourth straight day as Saudi Arabia cut prices for oil exports to U.S. customers amid speculation that stockpiles increased. WTI has lost 28 percent from this year’s high in June. Brent crude touched a four-year low today.
Investors are also watching earnings for further clues to the health of the U.S. economy. Prudential Financial Inc., 21st Century Fox Inc., and Walt Disney Co. are among more than 80 S&P 500 companies posting financial results this week.
Of the S&P 500 companies that have reported results so far for the third quarter, 81 percent have exceeded profit projections, while 61 percent posted better-than-forecast sales.
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