By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell Thursday, with the
S&P 500 tallying its first two-day losing run this month, as a
weak regional manufacturing index and uncertainty over U.S.
monetary moves hit sentiment.
"We're facing sequestration, gas prices are higher and the
payroll tax just went up, so people are starting to realize the
impact on their paychecks," said Schwab director of market and
sector research Brad Sorensen.
The approach of the March 1 deadline for federal budget
reductions, known as sequestration, also kept investors on shaky
ground, with the Chicago Board Options Exchange Volatility Index,
or VIX (VIX), rising 9.5% following a 19% rise on Wednesday, its
greatest leap since late 2011.
But Main Street and Wall Street are suffering from "government
crisis fatigue -- as we've been down this road so many times, so
it's another thing that goes into the mix," said Sorensen.
After falling as much as 93 points, the Dow Jones Industrial
Average (DJI) closed down 46.92 points, or 0.3%, to 13,880.62, with
two thirds of its 30 components in the red.
Moderating the drop, component Hewlett-Packard Co. (HPQ) rose
2.4% before reporting first-quarter results after the close.
Wal-Mart Stores Inc. (WMT) climbed 1.5% after the retailer
reported a fourth-quarter profit that beat estimates and hiked its
dividend.
The S&P 500 index (SPX) retreated 9.53 points, or 0.6%, to
1,502.42, with information technology falling the most among its 10
major sectors.
"The S&P 500 is coming up on first support at 1,495. On a
clear break, our downside target is the 1,474 area. This is the
home of the 50-day moving average and the January break," noted
Elliot Spar, market strategist at Stifel Nicolaus &
Company.
Verifone Systems Inc. (PAY) fell nearly 43% after the
manufacturer of credit-card terminals projected second-quarter
profit below Wall Street estimates due to Europe's soft economic
climate.
Safeway Inc. (SWY) shares leapt 14% after the grocery-store
chain reported a rise in fourth-quarter net income, with its
chairman and chief executive telling a conference call there had
been no noticeable impact from the payroll-tax cut that reduced
paychecks for many.
The Nasdaq Composite index (RIXF) declined 32.92 points, or 1%,
to 3,131.49, leaving it down 0.3% for the month.
For every stock rising more than two fell on the New York Stock
Exchange, where nearly 814 million shares traded. Composite volume
exceeded 4.2 billion.
Keeping drop in perspective
Investors were looking for a reason to pause an advance that has
the S&P 500 index currently up more than 5% for the year, said
Schwab's Sorensen. "Typically after the run we've seen I wouldn't
be surprised by a pullback in the 3% to 5% range. We probably
needed a bit of a selloff to get some of the speculative money out
of there," he said.
On Wednesday, stocks fell sharply after the release of minutes
from the last Federal Open Market Committee meeting revealed talk
of scaling back economic stimulus by varying the rate of Fed asset
purchases.
"There were a few Fed members that talked about the possibility
of adjusting their asset purchases. And certainly there are some on
the street that believe they should stop, or at least reduce them,
and let the economy start running on its own. It's encouraging they
believe the economy is strong enough to handle that now," Sorensen
said.
Equity investors "might have been looking for an excuse to take
profits," said Peter Schiff, CEO of Euro Pacific Capital Inc. "If
it wasn't the Fed minutes, it might have been something else," he
added.
While the market is likely in for near-term declines, stock
prices should trend higher, given the Federal Reserve's policy of
monetary easing, said Schiff, who opposes the economic stimulus. "I
don't think stock prices are going to go up as fast as gas prices,
for example," Schiff said.
In economic news, the Federal Reserve Bank of Philadelphia's
index fell to minus 12.5 in February from minus 5.8 the month
before.
Other economic reports had the index of U.S. leading indicators
climbing for a second month in January, and the sale of previously
owned homes up 0.4% in January.
The Labor Department reported jobless claims rose by 20,000 to
362,000 last week and that consumer prices were little changed last
month, with a decline in energy costs helping to offset rising
prices for goods and services.
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