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U.S. Stocks Drop as Manufacturing Gauge Falls More Than Forecast

February 3, 2014

Feb. 3 (Bloomberg) -- U.S. stocks fell, after the Standard & Poor’s 500 Index posted its biggest January loss since 2010, as a gauge of manufacturing in the world’s largest economy declined more than estimated.

Telephone stocks dropped after AT&T Inc. introduced new service plans, the latest in an escalating price war among wireless carriers. Jos. A. Bank Clothiers Inc. slid 3.1 percent after management told Men’s Wearhouse Inc. it will not enter takeover talks. Herbalife Ltd. climbed 1.8 percent after the vitamin maker boosted its share buyback by 50 percent.

The S&P 500 fell 0.6 percent to 1,771.99 at 10:05 a.m. in New York. The Dow Jones Industrial Average lost 84.26 points, or 0.5 percent, to 15,614.59. Trading in S&P 500 stocks was 28 percent above the 30-day averaging during this time of the day.

The S&P 500 slid 3.6 percent in January as the Federal Reserve trimmed its bond-buying program for the second time in as many months and emerging-market currencies tumbled amid signs growth was slowing in China. The country’s official Purchasing Managers’ Index decreased to a six-month low in January as output and orders slowed.

In the U.S., the Institute for Supply Management’s factory index decreased to 51.3 in January from 56.5 the prior month, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate expansion.

The median forecast of 85 economists surveyed by Bloomberg called for a decline to 56. Estimates ranged from 54 to 57.5. Manufacturing accounts for about 12 percent of the economy. The factory gauge averaged 53.9 for all of 2013.

 

Fed Stimulus

 

Fed policy makers said on Jan. 29 that the central bank will trim its monthly bond purchases by $10 billion to $65 billion, cutting the pace of stimulus for a second straight meeting because of an improving economy.

Three rounds of Fed bond buying has helped drive the S&P 500 up 163 percent from a 12-year low in 2009 while pushing capital into emerging markets in search of higher returns. The benchmark gauge for U.S. equities reached a record 1,848.38 on Jan. 15 and has fallen 3.6 percent since then.

"The market is adjusting to the Fed taking the punch bowl away," Douglas Cote, chief market strategist at ING U.S. Investment Management in New York, in a telephone interview. His firm oversees about $200 billion. "The market’s fundamentals remain solid. Even though we’re in the correction phase, ultimately the path for the market is up."

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