(Bloomberg) -- U.S. stocks were little changed, after the Standard & Poor’s 500 Index erased an earlier loss, as investors assessed corporate earnings and speculated on when the Federal Reserve will cut stimulus.
Visa Inc. lost 3.4 percent after the bank-card network said revenue rose less than projected. Expedia Inc. rallied 17 percent after posting earnings that exceeded estimates.
The S&P 500 rose less than 0.1 percent to 1,763.42 at 11:50 a.m. in New York, erasing an earlier drop of as much as 0.4 percent. The Dow Jones Industrial Average lost 17.94 points, or 0.1 percent, to 15,600.82. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.
“The Fed was a little bit more hawkish than people expected, not a lot, but incrementally more hawkish,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in a phone interview today. His firm oversees $400 billion. “Once they do start tapering, the market will start trading more on fundamentals, and fundamentals look fairly resilient.”
The S&P 500 fell 0.5 percent from a record yesterday, halting four days of gains, as the Fed fueled bets it may begin to cut stimulus in the coming months. The central bank maintained $85 billion in monthly bond purchases, saying that while the economy shows signs of “underlying strength” it needs to see more evidence of sustainable improvement.
Taper Odds
Economists at Citigroup Inc. and Barclays Plc said yesterday’s Fed policy statement opens the possibility of reduced bond purchases as soon as December. The odds of a taper in January rose to 45 percent, from 25 percent before the decision, according to Citigroup. Economists surveyed by Bloomberg Oct. 17-18 had predicted the Fed would begin paring stimulus in March.
Fed stimulus has helped propel the S&P 500 higher by more than 160 percent from a 12-year low in 2009. The gauge has surged 4.9 percent in October, heading for the biggest monthly gain since July, as lawmakers ended a 16-day government shutdown and agreed to extend the U.S. borrowing authority, avoiding a possible debt default.
Stocks slumped earlier today after a report showed business activity in the U.S. expanded in October as orders and production surged. The MNI Chicago Report business barometer jumped to 65.9 from 55.7 in September, the biggest monthly increase in more than three decades. Readings above 50 signal expansion.
Separate data showed fewer Americans filed applications for unemployment benefits last week as a backlog in California’s reporting cleared.
Earnings Season
Exxon Mobil, MasterCard and American International Group Inc. are among 34 companies in the S&P 500 reporting results today. Of the 356 companies that have reported results this season, 76 percent exceeded analysts’ predictions for profit, while 53 percent beat sales estimates, data compiled by Bloomberg showed.
Profits for members of the gauge probably increased 3.7 percent in the third quarter as sales climbed 2.4 percent, according to analysts’ estimates compiled by Bloomberg. Analysts project earnings will rise 7.5 percent in the final quarter, and 8.3 percent in the first three months of 2014.
“Company outlooks are still quite cautious,” Alexandra Walker-Ott, an equity fund manager at Swiss & Global Asset Management Ltd., said by phone from Zurich. “People are pricing strong earnings accelerations in the next few quarters, so there will inevitably be downgrades to expectations. The market isn’t cheap anymore and we may have a healthy correction soon.”
The S&P 500 is trading at 15.9 times its companies’ estimated earnings, the highest valuation since the start of 2010, according to data compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, the gauge known as VIX that measures options traders’ estimate of future price swings in the S&P 500, fell 1.1 percent to 13.50. The gauge has lost 19 percent this month.
