U.S. stocks fell after a four-day stretch of gains as analysts cut their recommendations on retailers before data tomorrow that may show a contraction in economic growth.
Dollar General Corp. and Lowe's Companies Inc. slipped more than 2 percent. Allergan Inc. dropped 4.4 percent as Valeant Pharmaceuticals International Inc. raised its unsolicited offer to about $49.4 billion. Toll Brothers Inc., the largest U.S. luxury-home builder, gained 1.9 percent after reporting that profit that more than doubled. Twitter Inc. added 4.2 percent after Nomura Holdings Inc. raised its rating on the shares.
The Standard & Poor's 500 Index slipped 0.2 percent to 1,908.08 at 10:44 a.m. in New York. The Dow Jones Industrial Average retreated 45.18 points, or 0.3 percent, to 16,630.32. The Nasdaq Composite Index lost 0.4 percent and the Russell 2000 Index sank 0.7 percent.
"People are focusing on the GDP number tomorrow," John Traynor, chief investment officer of People's United Bank Wealth Management in Bridgeport, Connecticut, said in a phone interview. His firm oversees $5.2 billion. "There are two camps of investors. They seem to fall down on the side of, 'Is the economy at a point where it reaches a self-sustaining path?'"
GDP Data
A report by the Commerce Department tomorrow may show the U.S. economy contracted 0.5 percent in the first quarter, following a preliminary estimate of 0.1 percent annualized growth, according to economists surveyed by Bloomberg News. GDP rose at a 2.6 percent annualized pace in the previous period. Economists forecast growth of 3.5 percent during the second quarter.
The S&P 500 climbed for a fourth day yesterday after durable-goods orders unexpectedly rose and JBS SA offered to buy Hillshire Brands Co. for $6.4 billion. The equities gauge is trading at 16.2 times the projected earnings of its members, compared with a five-year average of 14.3 times, according to data compiled by Bloomberg News.
"We've had new highs, so the sentiment is one of caution," Patrick Spencer, London-based head of equity sales at Robert W. Baird & Co., which oversees more than $100 billion, said by phone. "Some people are concerned that the vicious rotation out of momentum into value stocks signals the top of the equity market. I think it's a healthy rotation. Markets will go higher." Retailers Retreat
Consumer-discretionary stocks fell 0.4 percent for the worst performance among the 10 main S&P 500 industries. Dollar General, an owner of discount stores, declined 3.3 percent to $54.46 as Deutsche Bank AG lowered the stock's rating to hold from buy. Lowe's fell 2.2 percent to $46.72. Can accord Genuity Corp. analysts told clients to sell shares of the home improvement retailer.
An S&P index of homebuilders advanced 0.8 percent as all its 11 members rose. Toll Brothers climbed 1.9 percent to $36.32. The home builder has continued raising prices and boosting sales in the costlier New York and California markets.
Allergan, the maker of the Botox anti-wrinkle drug, dropped 4.4 percent to $157.83. Valeant added more cash to the bid in an effort to win backing from the target and its investors. As part of its defense, Allergan yesterday criticized Valeant's management practices and operations, saying it believes the Canadian company's organic sales growth is overstated.
