U.S. stocks fell, with the Standard & Poor’s 500 Index declining the most in a month, as concerns grew that the Federal Reserve may raise interest rates sooner than anticipated and a rally in Apple Inc. disappeared.
Apple erased a rally of as much as 4.8 percent as it unveiled new products including larger-screen iPhones.
The S&P 500 fell 0.7 percent to 1,988.45 at 4 p.m. in New York, for its largest retreat since Aug. 5. The Dow Jones Industrial Average lost 97.36 points, or 0.6 percent, to 17,014.06. The Russell 2000 Index of smaller companies tumbled 1.2 percent, its biggest drop since July 31.
“There are still a number of people who fear the Fed will raise rates too soon, but I don’t think there’s anything to be gained by being early in raising interest rates,” John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said. “If the Fed tightens too soon, it will drag the U.S. and the world into another recession.”
The Fed is gauging the strength of the economy as it winds down a bond-buying program and considers the timing of raising rates. Policy officials next meet Sept. 16-17.
Assessments of the strength of the economy are mixed. Gross domestic product expanded more than previously forecast in the second quarter, propelled by gains in business investment, while a report on Sept. 5 showed the economy added fewer jobs than anticipated in August. Data this week will likely show a decline in weekly jobless claims and stronger retail sales, according to economists’ forecasts.
Rick Rieder, BlackRock Inc.’s chief investment officer of fundamental fixed income in New York, said in a report that an improving labor market and signs of inflation argue for the Fed to boost borrowing costs. Meanwhile, former Fed Chairman Alan Greenspan said the U.S. economic rebound has been hindered by a slump in the construction industry as wage growth remains slow and credit conditions tight.
Wall Street strategists have been raising their targets for the S&P 500. Gina Martin Adams at Wells Fargo & Co. and Tony Dwyer, a strategist at Canaccord Genuity Securities LLC, were the latest today to lift their forecasts for the S&P. They follow increased projections from Morgan Stanley and Deutsche Bank AG yesterday and a bullish rating on global stocks from Goldman Sachs Group Inc.’s portfolio strategy team.
The S&P 500 retreated 0.3 percent yesterday after a five- week rally, its longest winning streak this year. The benchmark is trading at 16.6 times the projected earnings of its members, near the 16.8 multiple reached on Sept. 5 that was the highest valuation since the end of 2009, according to data compiled by Bloomberg.
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