Wall Street drops as energy sector drags
By Edward Krudy | February 21, 2013 6:56 AM EST
U.S. stocks fell on Wednesday, pressured by a drop in energy shares as investors found few reasons to buy equities following a rally that has propelled indexes close to all-time highs.
Stocks were volatile after minutes from the U.S. Federal Reserve suggested the central bank may have to slow or stop buying assets before seeing a pickup in hiring, raising the prospect of an earlier end to quantitative easing.
"What Wall Street wants to hear is an absolute sign that the Fed will continue with QE for the indefinite future. When it says we may end it faster, that just raises the uncertainty and the market hates that," said Todd Schoenberger, managing partner at Landcolt Capital in New York.
Energy companies' shares were among the weakest, hurt by disappointing results in the sector and a 2.3 percent drop in crude oil prices. The Energy Select Sector SPDR exchange-traded fund
The Dow Jones industrial average <.DJI> slipped 36.65 points, or 0.26 percent, to 13,999.02. The Standard & Poor's 500 Index <.SPX> dropped 9.50 points, or 0.62 percent, to 1,521.44. The Nasdaq Composite Index <.IXIC> lost 24.63 points, or 0.77 percent, to 3,188.96.
In the energy sector, Newfield Exploration
Equities have been strong recently. The day's modest decline was the largest for the S&P 500 since February 4. The index has jumped about 7 percent so far this year and is on track for its eighth straight week of gains.
However, many of those weekly gains have been slight, with equities trading within a narrow range for the past few weeks, suggesting valuations may be stretched at current levels.
"The market seems very tired and listless, and investors are prone to take profits now as they wait for the music to stop," said Matt McCormick, money manager at Bahl & Gaynor in Cincinnati.
Earlier in the day, unconfirmed rumors that a troubled hedge fund was selling assets added some downward pressure to the market. The rumors appeared to be unfounded.
"I heard the chatter about a hedge fund liquidating things today but how big, I don't know. Certainly, it sparks concern," said Michael James, senior trader at Wedbush Morgan in Los Angeles.
Housing shares also declined, pressured by weaker-than-expected results at Toll Brothers Inc
Toll Brothers' stock fell 6.1 percent to $34.66, but is up about 7 percent so far this year, building on a jump of nearly 60 percent in 2012. The Dow Jones U.S. Home Construction index <.DJUSHB> lost 4.3 percent.
"Valuations appear a bit high at these levels, and if I was in a name that had seen a huge run, I'd want to take some chips off the table," said McCormick, who helps oversee about $8.2 billion in assets.
The Dow's losses were limited by Boeing Co
In economic data released on Wednesday, permits for future home building rose in January to a 4 1/2-year high while a separate report showed wholesale prices rose last month for the first time in four months. The U.S. Producer Price Index rose in January for the first time in four months.
Shares of OfficeMax Inc
According to Thomson Reuters data through Tuesday morning, of the 405 companies in the S&P 500 that have reported results so far, 71 percent have exceeded analysts' expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters.
Fourth-quarter earnings for S&P 500 companies are estimated to have risen 5.7 percent, according to the data, exceeding a forecast for a 1.9 percent gain at the start of the earnings season.
(Additional Reporting by Ryan Vlastelica; Editing by Jan Paschal)
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