U.S. Stocks Fluctuate on Fed Bets Amid Economic Reports

U.S. stocks fluctuated, after benchmark indexes fell four straight days, as investors weighed data showing faster-than-forecast economic growth and an unexpected drop in jobless claims for clues on the timing of cuts to Federal Reserve stimulus.

Aeropostale Inc. lost 1.4 percent as the retailer's fourth-quarter loss forecast was wider than estimated. Safeway Inc. (SWY) slid 3.1 percent after Jana Partners LLC cut its stake in the supermarket chain. Apple Inc. rose 1.6 percent as China Mobile Ltd. moved closer to offering its 759 million subscribers iPhones.

The Standard & Poor's 500 Index (SPX) declined 0.1 percent to 1,791.86 at 10:11 a.m. in New York, trimming an earlier slide of 0.4 percent. The Dow Jones Industrial Average rose 5.07 points, or less than 0.1 percent, to 15,894.84. Trading in S&P 500 stocks was 4.3 percent below the 30-day average at this time of day.

"The numbers today pave the way for the Fed" to cut stimulus, Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said by phone. His firm oversees $363.8 billion. "There's angst in the short run, but I think it's only positive in the long run that the Fed begin to taper and extricate itself from being the ultimate market maker."

The S&P 500 has surged 26 percent this year, challenging 2003 for the biggest annual gain in the last 15 years, as the Fed refrained from reducing its monthly bond purchases and corporate earnings surpassed estimates. The central bank has said it will start slowing the pace of stimulus if the economy improves in line with its forecasts.

GDP Growth

The U.S. economy expanded in the third quarter at a faster pace than initially reported, led by the biggest increase in inventories since early 1998. Consumer spending slowed. Gross domestic product climbed at a 3.6 percent annualized rate, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012.

Another report indicated U.S. factory orders declined 0.9 percent in October. Economists expected a decline of 1 percent, according to data compiled by Bloomberg. The September figure was revised to an increase of 1.8 percent from a previous reading of 1.7 percent.

Separate data showed applications for U.S. employment benefits unexpectedly fell last week to the lowest level in more than two months. Jobless claims decreased 23,000 to 298,000 in the week ended Nov. 30, the Labor Department said. The median forecast of 41 economists surveyed by Bloomberg called for an increase to 320,000.

Jobs Data

The S&P 500 fluctuated yesterday before closing lower by 0.1 percent, as better-than-forecast payroll data that fueled tapering concerns outweighed optimism that lawmakers in Washington were close to a budget deal. Data tomorrow may show the unemployment rate fell to 7.2 percent, matching the lowest level since 2008.

Fed Bank of Atlanta President Dennis Lockhart, a backer of record stimulus, said today the central bank when considering tapering should announce a total limit on purchases or a timetable for dialing down the program.

"If and when the FOMC arrives at a decision to wind down asset purchases, it's my view that it will be helpful to the transition process to provide as much certainty as possible about how this will be done," Lockhart said in a speech in Florida.

Taper Timing

Policy makers, who next meet Dec. 17-18, will probably wait until the March 18-19 Federal Open Market Committee session before reducing monthly bond purchases to $70 billion from $85 billion, according to the median estimate in Bloomberg's latest survey of economists conducted on Nov. 8.

Confidence among U.S. consumers rose last week to its highest since Oct. 6, propelled by gains among almost every income group. The Bloomberg Consumer Comfort Index increased to minus 31.3 in the period ended Dec. 1.

The S&P 500's rally this year has pushed valuations higher, with the equity benchmark trading for about 16.1 times its constituents' projected earnings, up 23 percent from the beginning of 2013 when it traded at 13.1 times projected profit.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 1.2 percent to 14.88, the highest level in six weeks. The measure has rallied eight straight sessions, its longest advance since April 2012.

Nine of 10 main S&P 500 industries fell today. Phone stocks paced declines with a 0.9 percent retreat. Verizon Communications Inc. (VZ) slid 1 percent to $48.86.

Aeropostale, Safeway

Aeropostale dropped 1.4 percent to $9.23. The retailer of teen apparel reported third-revenue that missed analysts' estimates and forecast a fourth-quarter loss of 24 cents to 32 cents a share, wider than the 5 cents analysts estimated.

Safeway Inc. slipped 3.1 percent to $33.15. Investor Jana Partners LLC cut its stake in the grocery chain to about 4.1 percent. Jana Partners reported a 6.2 percent holding in the retailer on Sept. 17.

Apple added 1.6 percent to $573.88. China Mobile and two smaller domestic carriers received approval to operate on the country's fourth-generation wireless network. The world's biggest phone company said in 2011 that Apple agreed to make an iPhone for its customers once it shifted to 4G.

General Growth Properties Inc. rose 3.6 percent to $21. The company will replace Molex Inc. in the S&P 500 after the close of trading on Dec. 9, according to a statement late yesterday.

Dollar General Corp. (DG) increased 6.2 percent to $59.89 for the biggest gain in the S&P 500, after raising its full-year earnings forecast. The discount retailer reported third-quarter earnings of 72 cents per share, beating analyst estimates of 70 cents per share in the quarter.

Puma Biotechnology Inc. soared 39 percent $64 after saying its experimental breast-cancer drug is likely to progress to the third and final stage of clinical trials usually needed before winning regulatory approval.