US stocks fall as Kerry says Syria to be held accountable

Bloomberg NewsAugust 27, 2013 

NEW YORK -- U.S. stocks fell, with the Standard & Poor's 500 Index's halting two days of gains, after Secretary of State John Kerry said the president will hold Syria's government accountable for using chemical weapons.

Tyson Foods, the largest U.S. meat processor, slid 7.3 percent after Bank of America analysts cut their rating on the stock. Archer-Daniels-Midland, the largest corn processor, dropped 4.9 percent as hot, dry weather in the Midwest threatened to reduce crop harvests. Amgen jumped 7.7 percent after agreeing to buy cancer-treatment developer Onyx Pharmaceuticals in a $10.4 billion transaction.

The S&P 500 declined

0.4 percent to 1,656.78 at 4 p.m. in New York, erasing an earlier gain of as much as 0.4 percent. The Dow Jones Industrial Average lost 64.05 points, or 0.4 percent, to 15,946.46.

"If there's going to be turmoil and then if there's going to be some retaliation and affect U.S. assets, people get a little scared," Frank Ingarra, head trader at Greenwich, Conn.-based NorthCoast Asset Management, said in a phone interview. "It's a bit of a pullback so people are probably taking some risk off the table."

President Barack Obama is consulting with allies and members of Congress and "believes there must be accountability for those who have used the world's most dangerous weapons," Kerry said.

"By any standard it is inexcusable," Kerry told reporters in Washington on Monday, saying evidence makes it "undeniable" that Syrian President Bashar Assad's regime was responsible for last week's attack that the opposition blames for more than 1,300 deaths.

The S&P 500 spiked lower following the statements after earlier extending its first weekly gain since Aug. 2., as investors speculated whether a report showing durable-goods orders fell in July would delay stimulus cuts.

A Commerce Department report showed bookings for goods meant to last at least three years decreased 7.3 percent, the most since August 2012, after a 3.9 percent gain in June. Orders waned for aircraft and capital goods such as computers and electrical equipment.

"It's another data point that indicates a slow recovery," Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, N.C., said by phone. "Given that the Fed's position is data dependent, then I think that the odds are increasing that there'll be less tightening than more."

Stocks rebounded last week after data showing a plunge in sales of new homes eased concern that the Federal Reserve would curb stimulus efforts next month. Officials have been weighing whether the economy is strong enough to prompt a reduction in stimulus, which has helped propel the S&P 500 up as much as 153 percent from its March 2009 low.

Speculation about the stimulus has whipsawed stocks since May, when Chairman Ben Bernanke first indicated cuts could start this year. Sixty-five percent of economists in a Bloomberg Aug. 9-13 survey said the first reduction would come at the Sept. 17-18 meeting.

The Chicago Board Options Exchange Volatility Index, or VIX, rose 7.2 percent to 14.99 on Monday, surging after Kerry's comments to reverse an earlier drop of 0.6 percent. The equity volatility gauge has jumped 27 percent since Aug. 5.

Trading in U.S. exchanges is heading for the second-slowest month in at least five years, according to data compiled by Bloomberg. An average of about 5.5 billion shares have changed hands each day this month. That's about 60 million shares more than last August. About 4.7 billion shares traded Monday, 24 percent below the three-month average.

Nine of 10 major groups in the S&P 500 fell. Shares in phone companies and consumer staples producers lost at least 1.1 percent to pace declines. Procter & Gamble slid 1.8 percent to $78.54 for the steepest drop in the Dow. AT&T and Verizon retreated 1.4 percent.

Tyson Foods dropped 7.3 percent to $29.17 for the steepest decline in the S&P 500. Ryan Oksenhendler and Bryan Spillane at Bank of America's Merrill Lynch unit cut the shares to neutral, similar to a hold rating, from buy, after a 62 percent rally this year.

"Industry data indicate a steep increase in production," the analysts wrote in a report on Monday. "In our view, this is likely to cause industry margins to peak sooner than we expected." They also cut Tyson's 2014 profit estimates, citing lower chicken prices.

Archer-Daniels-Midland fell 4.9 percent to $34.50, while Kraft Foods declined 1.4 percent to $52.08, the lowest since May. Temperatures will average as much as 14 degrees Fahrenheit above normal during the next seven days, with little rain expected in the Midwest, T-Storm Weather said in a note to clients Monday. Rainfall in July and August will be the least since 1936 in Iowa, Illinois and Indiana.

An S&P index of homebuilders added 0.5 percent, rebounding from a 3.1 percent drop on Friday following the new home-sales report. The gauge has lost 26 percent since climbing to near a six-year high on May 14, as rising interest rates have raised concern that the housing recovery could slow. Treasury 10-year yields retreated on Monday.

KB Home rose 1.2 percent to $16.63 Monday and Toll Brothers advanced 0.8 percent to $31.43. Home Depot, the largest U.S. home-improvement retailer, climbed 2.1 percent to $75.43 for the biggest increase in the Dow.

"The home industry is on firm footing," Jim Russell, senior equity strategist for U.S. Bank Wealth Management, said in an interview from Cincinnati. His firm oversees $110 billion. "We do think the homebuilders are going to be pretty much tied at the hip to the daily interest rate moves, and absolutely tied to what's decided on the taper."

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