(Bloomberg) -- U.S. stocks fluctuated, after the Standard & Poor’s 500 Index dropped three straight days, as investors watched federal budget negotiations and weighed economic data for clues on the timing of Federal Reserve stimulus cuts.
Hewlett-Packard Co. and Microsoft Corp. added at least 1.5 percent as technology stocks advanced. CF Industries Holdings Inc. jumped 10 percent after the fertilizer producer said its considering partnership structures. Sears Holdings Corp. plunged 8 percent after Edward Lampert, the hedge-fundmanager who for the past eight years tried to turn around the company, cut his stake to below 50 percent.
The S&P 500 climbed less than 1 point to 1,795.46 at 11:33 a.m. in New York, erasing an earlier decline of as much as 0.5 percent. The Dow Jones Industrial Average added 3.26 points, or less than 0.1 percent, to 15,917.88. Trading in S&P 500 stocks was 8.8 percent above the 30-day average at this time of day.
“It seems like an olive branch is being extended from both parties right now on the budget,” Michael Mullaney, who oversees more than $10 billion as Boston-based chief investment officer for Fiduciary Trust Co., said in a telephone interview. “That’s positive. It’s a reason for people to buy the dip right now.”
U.S. budget negotiators are near a deal to ease automatic spending cuts that congressional aides say could boost user fees rather than end corporate tax breaks. A committee of 29 members is aiming to reach an agreement by Dec. 13 that sets federal spending levels for this year and next.
Still Issues’
Senate Budget Committee Chairwoman Patty Murray, the lead Senate negotiator, told reporters today there are “still issues to be resolved.”
Congress on Oct. 16 passed legislation funding the government through Jan. 15 as part of the agreement to end a partial shutdown, the first in 17 years.
The S&P 500 had retreated 0.7 percent in the previous three session after closing at a record on Nov. 27. The gauge fell earlier today as data showing companies boosted payrolls in November by the most in a year fueled speculation the Federal Reserve may trim monetary stimulus sooner than forecast.
The benchmark index has surged 26 percent this year, challenging 2003 for the biggest annual gain in the last 15 years, as the Fed has refrained from reducing its monthly bond purchases. Central-bank policy makers have been scrutinizing data to determine whether the economy is robust enough to withstand a reduction in their support.
Service Industries
Separate data today indicated service industries in the U.S. expanded at a slower pace than forecast in November, showing uneven progress in the biggest part of the economy. The Institute for Supply Management’s non-manufacturing index decreased to 53.9 in November from 55.4 in the prior month.
Purchases of new U.S. homes surged in October by the most in three decades, signaling buyers are starting to take higher mortgage rates in stride. A separate report from the agency showed the trade deficit in the U.S. narrowed in October for the first time in four months as exports climbed to a record.
The Fed has said it will start paring its $85 billion of monthly bond purchases if the economy improves in line with its forecasts. The central bank releases its Beige Book report on economic conditions in its 12 districts at 2 p.m. in Washington.
The Federal Open Market Committee next meets on Dec. 17-18. Policy makers will probably wait until their March 18-19 meeting before reducing their monthly bond purchases to $70 billion, according to the median estimate in Bloomberg’s most recent survey of economists conducted on Nov. 8.
Volatility Gauge
The S&P 500’s rally this year has pushed valuations higher, with the gauge trading for about 16.9 times its companies’ reported earnings, up 19 percent from the beginning of 2013 when it traded at 14.2 times profit.
Investment newsletter writers are the most bullish on the U.S. stock market in more than two and a half years, with 57.1 percent predicting further gains, according to a survey by research provider Investors Intelligence. The last time the reading exceeded this level was in April 2011, when 57.3 of advisers were bullish and the S&P 500 fell 11 percent in the next four months. The bullishness measure last rose above 60 percent in October 2007, the start of a bear market.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, slid 0.9 percent to 14.42, halting a six-day advance that added 19 percent to the measure.
Four of 10 main S&P 500 industries advanced today, with materials producers and financial firms climbing at least 0.5 percent to pace gains.
Technology stocks rose 0.3 percent. Hewlett-Packard gained 3.7 percent to $28.21. Microsoft added 1.5 percent to $38.89 for the biggest advance in the Dow.
An S&P gauge of homebuilders added 0.4 percent, reversing an earlier drop of 1.8 percent following the sales data. Toll Brothers Inc. climbed 1.2 percent to $33.56 and KB Home rose 1.6 percent to $17.35.
Sears, Express
CF Industries soared 10 percent to $236.11 for the biggest gain in the S&P 500. The largest U.S. nitrogen-fertilizer maker is in talks with financial advisers to evaluate a master-limited partnership and “MLP-like structures along with other financial options,” the company said today in a filing containing presentation slides.
Deere & Co. rallied 4.5 percent to $86.42, the most since April. The world’s largest maker of agricultural equipment said it will repurchase as much as $8 billion in stock.
Sears slid 8 percent to $51.12. Lampert’s ESL Investments Inc. owns 48 percent of the Hoffman Estates, Illinois-based department store chain, down from 55 percent reported as recently as October, according to a filing yesterday with the U.S. Securities and Exchange Commission.
Express Inc. sank 22 percent to $19.21. The retailer lowered its earnings forecast for its financial year ending on Feb. 1 to no more than $1.51 a share. It had predicted as much as $1.60. Analysts on average had estimated profit of $1.61.
