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U.S. Stock-Index Futures Decline After Record S&P 500 Rally

January 2, 2014
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U.S. stock-index futures declined, following the best year since 1997 for the Standard & Poor’s 500 Index, as investors awaited a report on manufacturing output.

Apple Inc. fell 1.1 percent after Wells Fargo & Co. downgraded the stock. Xilinx Inc. gained 2.1 percent after Goldman Sachs Group Inc. advised investors to buy the shares. Newmont Mining Corp. added 1.6 percent as gold rose to a two- week high in London.

Futures on the S&P 500 expiring in March slid 0.2 percent to 1,838.20 at 8:34 a.m. in New York. Dow Jones Industrial Average contracts retreated 27 points, or 0.2 percent, to 16,467. U.S. markets were closed yesterday for New Year’s Day.

"More people seem to be wary, as we are, of potential corrections as markets get overexcited," Oliver Wallin, who helps oversee $5.6 billion as investment director at Octopus Investments Ltd. in London, said by phone. "The question is just when to time it. A lot of people are willing to continue in this rally but are nervous at the same time. We’ve got one eye on the exit but we know there is money to be made in the short term."

The S&P 500 surged 30 percent in 2013, finishing the year at an all-time high for the first time since 1999. The index gained 2.4 percent in December, its fourth straight monthly advance, as the Federal Reserve announced plans to reduce the pace of bond buying amid faster-than-estimated economic growth. Three rounds of Fed stimulus have sent the S&P 500 up 173 percent from a 12-year low in 2009.

Dow Rally

The Dow average climbed 27 percent in 2013 for its best performance since 1995, led by Boeing Co. and American Express Co. International Business Machines Corp. is the only member of the 30-stock gauge that declined last year.

Improving economic data that bolstered optimism about strength in the world’s largest economy also helped propel equities higher.

Data today indicated applications for U.S. unemployment benefits declined last week to the lowest level in a month. Jobless claims fell by 2,000 to 339,000 in the period ended Dec. 28, Labor Department data showed. The median forecast of 26 economists surveyed by Bloomberg called for 344,000 claims.

A separate report at 10 a.m. in New York may show the Institute for Supply Management’s manufacturing index decreased to 56.8 in December from 57.3 in the previous month, according to a survey of Bloomberg economists. A reading above 50 signals expansion.

Reports from Europe today confirmed factory output in the euro area expanded last month at the fastest pace since May 2011 as Italy’s manufacturing beat estimates and Germany production grew for a sixth month. Data yesterday showed China’s official Purchasing Managers’ Index slipped to a four-month low in December, while a private report today also signaled manufacturing grew at a slower pace.

Apple declined 1.1 percent to $555.01. Wells Fargo analyst Maynard Um cut the rating on the stock to market perform from outperform, saying the iPhone maker’s gross margin could come under pressure later in the year.

Goldman Sachs downgraded ON Semiconductor Corp. to neutral from buy and cut Analog Devices Inc. to sell from neutral. ON fell 1.8 percent to $8.09, while Analog Devices retreated 2.8 percent to $49.50.

Xilinx, a chipmaker based in San Jose, California, gained 2.1 percent to $46.90. The shares were raised to buy from neutral by analyst James Schneider at Goldman Sachs for the first time since October 2008.

Newmont Mining increased 1.6 percent to $23.40. Gold advanced to a two-week high in London after the metal posted its largest annual decline in three decades. Newmont fell 50 percent last year for the biggest decline in the S&P 500.

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