June 21 (Bloomberg) -- U.S. stocks retreated for the third straight day, following the biggest drop since 2011 for the Standard & Poor’s 500 Index after Federal Reserve Chairman Ben S. Bernanke said the central bank may phase out stimulus.
Technology and raw-material shares posted the biggest declines. Oracle Corp. tumbled 8.6 percent after reporting a second straight quarter of sales that missed estimates. Facebook Inc. increased 1 percent after adding video to its Instagram photo-sharing service for smartphones.
The S&P 500 fell 0.5 percent to 1,580.23 at 11:39 a.m. in New York, reversing an earlier rally of as much as 0.7 percent. The Dow Jones Industrial Average lost 47.31 points, or 0.3 percent, to 14,711.01. Trading of S&P 500 companies was 97 percent higher than the 30-day average. Stock trading may be more volatile than usual as futures and options contracts expire in a process known as quadruple witching.
“It’s wait and see, because Bernanke’s comments were a curve ball,” Michael Mullaney, chief investment officer at Fiduciary Trust Co. in Boston, said by telephone. His firm manages about $9.5 billion. “While it might be the best thing for the economy and the markets to put in a program to unwind QE, the timing is critical.”
The S&P 500 sank 2.5 percent yesterday as global equities tumbled after the Fed indicated it may start paring stimulus measures as soon as September. The benchmark index declined 4.9 percent since its May 21 high through yesterday amid speculation the Fed will scale back quantitative easing that helped fuel a rally in stocks worldwide and lifted the S&P 500 as much as 147 percent from its bear-market low in 2009.
Billionaire investor Ken Fisher said the U.S. stock rally is only in its “middle” stages because most investors still underestimate the strength of the economy.
“We’re right in that transition between skepticism and optimism,” the founder of Fisher Investments, which manages $48 billion, said in an interview at Bloomberg News’s office in Seattle on June 19. “The notion that it’s actually the middle of a bull market and there’s a lot ahead. That’s a really impossible concept for most people to get.”
Economists have increased forecasts that the Fed will trim its monthly bond purchases to $65 billion in September and end buying in June 2014. In a Bloomberg survey of 54 economists conducted June 19-20, 44 percent saw a tapering in September, up from 27 percent in a June 4-5 survey.