U.S. stocks retreat as payroll report overshadows services data

Bloomberg NewsFebruary 6, 2014 

Wall Street

FILE - In this May 11, 2007, file photo, a Wall Street sign is mounted near the flag-draped facade of the New York Stock Exchange. Corporate earnings season is off to a positive start, helping lift the stock market Wednesday, July 9, 2014, after two days of declines. (AP Photo/Richard Drew, File)


NEW YORK -- U.S. stocks fell Wednesday, sending the Standard & Poor's 500 index to its third loss in four days, as a private report showing companies added fewer jobs than forecast overshadowed acceleration in service industries.

Cognizant Technology Solutions fell 4.3 percent on a disappointing forecast. Estee Lauder dropped 5.5 percent as its quarterly earnings prediction missed estimates. 3D Systems slumped 15 percent after its projection trailed expectations amid sluggish consumer demand. Genworth Financial and Radian Group rallied at least 2.8 percent after posting profits from insuring U.S. mortgages.

The S&P 500 fell 0.2 percent to 1,751.64. The Dow Jones industrial average lost 5.01 points, or less than 0.1 percent, to 15,440.23. About 7.4 billion shares changed hands on U.S. exchanges, 18 percent above the three-month average.

"There's uncertainty around the economic outlook," Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates in Greenwood, S.C., said in a phone interview. "People had a lot of confidence coming into this year that the economy was accelerating, and the recent set of economic statistics have thrown that into question."

The S&P 500 added 0.8 percent Tuesday, rebounding from its biggest slide since June, as companies from Yum Brands to Michael Kors Holdings reported profit that exceeded projections. The index is down 5.2 percent this year, and lost as much as 5.8 percent since reaching a record 1,848.38 on Jan. 15, the first decline of more than 5 percent since June 2013.

The Labor Department may report in two days that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.

Companies added 175,000 payrolls last month as colder-than- normal weather limited progress in the U.S. job market, a report from ADP Research Institute in Roseland, N.J. showed Wednesday. The median projection of 40 economists surveyed by Bloomberg called for an advance of 185,000.

"The market wants to see a happy report" on Friday and today's ADP data "might mute them slightly," Michelle Clayman, chief investment officer at New Amsterdam Partners in New York, which manages $1.6 billion. "The ADP number is not a bad number, but it's certainly down from the rate of last time's report and slightly below expectations so that's making people a bit more cautious."

A separate report Wednesday showed a gauge of service industries advanced more than forecast. The

Institute for Supply Management's non-manufacturing index increased to 54 in January from 53 the prior month. Readings greater than 50 signal expansion. The median forecast of 78 respondents in a Bloomberg survey called for a reading of 53.7.

The S&P 500 fell 3.6 percent in January, its first monthly decline since August as the Fed pared stimulus and emerging- market currencies slumped amid signs China's economy is slowing.

Federal Reserve Bank of Philadelphia President Charles Plosser, who votes on policy this year, said Wednesday that he expects the economy to expand 3 percent in 2014 as the jobless rate falls to 6.2 percent by year-end, warranting a quicker tapering to bond purchases by the central bank.

Some 26 companies on the S&P 500 were scheduled to report quarterly results Wednesday. Profit for the benchmark's stocks probably increased by 8.3 percent in the fourth quarter of 2013 and revenue by 2.5 percent, analysts' estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index added 4.4 percent Wednesday to 19.95. The gauge of S&P 500 options known as the VIX has surged 45 percent this year.

Six of 10 S&P 500 industry groups fell as energy, health-care and telephone shares sank at least 0.6 percent for the worst performance. Chevron lost 1.2 percent to $109.52, among the biggest drops in the Dow.

Cognizant fell 4.3 percent to $92.85. The provider of outsourcing services forecast adjusted earnings of at least $5.02 a share for 2014. That compared with the average analyst estimate for $5.08.

Estee Lauder retreated 5.5 percent to $65.36. The maker of cosmetics and skin care products said it expects to earn no more than 55 cents a share in the fiscal third quarter. That missed the average analyst estimate of 64 cents in a Bloomberg survey.

3D Systems tumbled 15 percent to $64.10. The maker of three-dimensional printers said it expects to earn 85 cents a share this year. Analysts, on average, estimated $1.29.

Gilead Sciences slipped 4.7 percent to $78.15 even as fourth-quarter earnings beat analysts' estimates, helped by rising sales from a new medicine for hepatitis C. Shares of the world's largest maker of HIV drugs more than doubled in the 12 months through yesterday.

Genworth climbed 2.8 percent to $14.93 while Radian jumped 6 percent to $15.19. Genworth, which also offers life insurance and long-term care coverage, had a $6 million operating profit at its U.S. mortgage insurer, compared with a loss a year earlier. Radian reported net income of $36.4 million, after a $177.3 million loss in the last three months of 2012.

Myriad Genetics surged 15 percent to $31.29. The breast-cancer test provider forecast earnings in 2014 will be $2.09 to $2.12 a share. that's higher from a November prediction that profit would be no more than $1.97 a share.

Sprint rallied 8.4 percent to $8.50. The company is getting close to securing $45 billion financing to make an offer for T-Mobile US, DealReporter said, citing people familiar with the situation.

With assistance from Bloomberg reporters Inyoung Hwang in London and Zachary Tracer in New York.

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