U.S. stocks fall amid economic data before January Fed minutes

(Bloomberg) -- U.S. stocks fell, after the Standard & Poor’s 500 Index rose to a record Tuesday, as factory production rose less than forecast before the release of minutes from the last Federal Reserve meeting.

S&P 500 slipped 0.3 percent to 2,093.44 at 12:59 p.m. in New York, after the benchmark index closed at a record Tuesday. The Dow Jones Industrial Average lost 55.36 points, or 0.3 percent, to 17,992.22. Trading in S&P 500 companies was 19 percent below the 30-day average.

“The Fed minutes will be somewhat interesting this afternoon to get insights into their thinking,” Walter Todd, who oversees just over $1 billion as chief investment officer for Greenwood, South Carolina-based Greenwood Capital Associates LLC, said by phone. “The big question here is how are they going to interpret and respond to what is clearly a softer data set over the last several months.”

In a statement after its January meeting, the Fed reiterated the previous month’s stance that the committee would be patient in deciding when to begin raising interest rates, and said job gains were strong. Several Fed officials have said the U.S. central bank’s first interest-rate increase in almost a decade may come as soon as June. Minutes from the meeting are due at 2 p.m. in Washington.

“If they take the word ‘patient’ out of statements, the Fed could be saying ‘over the next few meetings, look for us to raise rates,’” Joe “JJ” Kinahan, chief strategist at TD Ameritrade Holding Corp., said in a phone interview. “That’s all the market is looking for and they’re on high alert for this.”

Factory Production

Data today showed factory production in the U.S. rose less than forecast in January, held back by a decline in motor vehicle assemblies and weaker demand for construction materials.

A separate report on housing starts showed builders broke ground on fewer U.S. residential construction projects in January as demand for single-family homes cooled from an almost seven-year high. Wholesale prices in the U.S. fell more than forecast in January, led by plunging energy costs and signaling inflation remains tame even as the economy is expanding.

Speculation that a Greek debt impasse is easing helped the S&P 500 reach an all-time high yesterday, while European equities today rallied to their highest in seven years. A government official, speaking on condition of anonymity, said Greece will submit its request for a loan extension tomorrow.

“We have been here before on Greece, thinking a deal has been reached, so the market is waiting for a confirmation,” said Michael Ingram, a market strategist at BGC Brokers LP in London.

The route for stocks this year has been uneven -- a 5.1 percent rally in February after the worst month in a year in January has evened out to a 1.8 percent gain for 2015, trailing most developed markets.

The Chicago Board Options Exchange Volatility Index climbed 3.7 percent to 16.39. The gauge, know as the VIX, fell 15 percent last week.

Hedge Funds

Exxon Mobil Corp. declined 2.1 percent after Warren Buffett’s Berkshire Hathaway Inc. exited a $3.7 billion investment in the company.

Some big hedge fund managers have cut their holdings in U.S. stocks in the fourth quarter and shifted assets globally as the slide in oil prices hammered energy holdings.

Greenlight Capital’s David Einhorn said he’s scaled back bets on stock gains after markets climbed and as a stronger dollar threatens to limit earnings of U.S. companies from operations overseas.

David Tepper’s Appaloosa Management had $2.74 billion less in U.S. stocks in the fourth quarter, a 40 percent drop from the previous quarter. Soros Fund Management, the family office of billionaire hedge fund manager George Soros, moved about $2 billion into companies in Asia and Europe, according to a person familiar with the strategy.

Some managers, such as Leon Cooperman, 71, remain bullish on the U.S., while predicting bigger gains elsewhere.

“We expect the European and Japanese equity markets to outperform the U.S. in the coming year,” Cooperman, who runs Omega Advisors, wrote in an investor letter last month.

Earnings Season

Fossil Group Inc. tumbled 19 percent. The maker of watches, handbags and other accessories posted fourth-quarter sales and an annual forecast that trailed analysts’ estimates. Earnings this year won’t exceed $6.05, the company said. Analysts estimated $7.52.

Energy companies in the S&P 500 dropped 1.3 percent, led by Diamond Offshore Drilling Inc.’s 6.5 percent retreat, as oil prices renewed a decline after three days of gains. West Texas Intermediate slipped 2.5 percent. Crude lost more than 3 percent Tuesday before rebounding to a 1.4 percent gain.

Boston Scientific jumped 11 percent. The company said it will pay $600 million to Johnson & Johnson to settle a lawsuit over its $27.5 billion acquisition of Guidant Corp. almost a decade ago.

Deere & Co. climbed 2 percent after Berkshire Hathaway more than doubled its stake in the company in the fourth quarter, to 17.1 million shares.

Utility companies were the S&P 500’s best performers Wednesday, rising 0.9 percent after falling 4.5 percent over the previous four sessions.

--With assistance from Katherine Burton and Margaret Collins in New York, Noah Buhayar in Seattle and Roxana Zega in Zurich.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.