U.S. Stocks Drop as Investors Await Report on Home Sales

By Sarah Pringle & Namitha Jagadeesh 

U.S. stocks declined, after the Standard & Poor’s 500 Index yesterday approached a record high, as investors awaited a report that may show pending house sales fell in February.

Banks retreated as JPMorgan Chase & Co. and Morgan Stanley fell at least 0.6 percent. Cliffs Natural Resources Inc. tumbled 12 percent after Morgan Stanley downgraded the shares. Dollar General Corp. (DG) slumped 1.8 percent after it said 30 million shares will be sold in a secondary offering. Mattress Firm Holding Corp. rallied 6.7 percent after Raymond James & Associates Inc. raised its rating on the retailer.

The S&P 500 (SPX) dropped 0.6 percent to 1,554.33 at 9:48 a.m. in New York. The equity benchmark rallied 0.8 percent yesterday as orders for durable goods and home pricesexceeded estimates. The Dow Jones Industrial Average fell 91.65 points, or 0.6 percent, to 14,468 today. Trading among S&P 500 shares was 23 percent below the 30-day average.

“All are eyes are on housing data this week,” said Steven Neimeth, a money manager at SunAmerica Asset Management in Jersey City, New Jersey, which manages about $12 billion. “Investors continue to be very positive on the recovery of housing and the data continues to be good. But it seems like the bullish sentiment around the sector is as high as we’ve ever seen it, and any slight disappointment could throw cold water on the sector.”

A report from the National Association of Realtors at 10 a.m. in Washington may show pending sales of existing houses declined in February. Contracts to purchase previously owned U.S. homes slid 0.3 percent after a 4.5 percent gain in January, economists forecast in a Bloomberg survey.

Record Highs

The S&P 500 rallied yesterday to within two points of its record of 1,565.15 reached in October 2007. The benchmark gauge has surpassed the 1,560 level on six days since March 14, only to fall short of the record each time. The Dow climbed to another record yesterday, after first surpassing its 2007 all- time high on March 5.

The bull market in equities entered its fifth year this month as the S&P 500 more than doubled from its bottom in 2009, driven by an unprecedented three rounds of bond purchases by theFederal Reserve. The S&P 500 is up 9 percent for the year.

Banks retreated today, as JPMorgan slid 0.9 percent to $48.19 and Morgan Stanley lost 0.6 percent to $22.09. Citigroup Inc. fell 0.7 percent to $44.51.

Cliffs Natural

Cliffs Natural Resources plunged 12 percent to $18.84. Morgan Stanley cut its recommendation on shares of the biggest U.S. iron-ore producer to underweight, the equivalent of sell, from equal weight. The company’s iron-ore business will be halved in the coming years because of increased supply in the Great Lakes area, analysts led by Evan Kurtz wrote in a note.

Separately, Credit Suisse Group AG cut its 12-month estimate on the share price to $10 from $20, while maintaining an underperform rating.

Dollar General fell 1.8 percent to $51.27. The discount retailer said 30 million of its shares will be sold in an underwritten secondary public offering. The offer is by certain existing shareholders and no shares are being sold by the company, Goodlettsville, Tennessee-based Dollar General said in a statement.

Best Buy Co. dropped 0.5 percent to $22.58. S&P Capital IQ cut its rating on the electronics retailer to sell from hold.

Mattress Firm Holding rallied 6.7 percent to $33.11. Raymond James equity analyst Budd Bugatch lifted his rating on the Houston-based retailer to outperform from market perform.

SAIC advanced 6 percent to $13.59 after the eighth-largest contractor to the U.S. government said late yesterday it will pay a special dividend of $1 per share. The company forecast full-year earnings of $1.16 to $1.33 a share.

AOL Inc., the Web publisher that owns the Huffington Post and TechCrunch, climbed 7.1 percent to $38.75. Barclays raised its rating on the company to overweight from equalweight, noting that modest revenue growth and streamlining of its cost structure will provide upside support.

To contact the reporters on this story: Sarah Pringle in New York at springle1@bloomberg.net; Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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