March 27th, 2013

S&P 500 Futures – U.S. stocks declined, after the Standard & Poor’s 500 Index yesterday approached a record high, as concern over Europe’s debt crisis intensified and pending American home sales slipped in February.

Banks retreated as JPMorgan Chase & Co. and Citigroup Inc. fell at least 0.9 percent. Cliffs Natural Resources Inc. tumbled 13 percent after Morgan Stanley downgraded the shares. Dollar General Corp. (DG) slumped 2 percent after it said 30 million shares will be sold in a secondary offering. Mattress Firm Holding Corp. rallied 9.4 percent after Raymond James & Associates Inc. raised its rating on the retailer.

The S&P 500 dropped 0.4 percent to 1,557.99 at 11:03 a.m. in New York. The equity benchmark rallied 0.8 percent yesterday as orders for durable goods and home prices exceeded estimates. The Dow Jones Industrial Average fell 55.70 points, or 0.4 percent, to 14,503.95 today. Trading among S&P 500 shares was 17 percent below the 30-day average.

“Investors are expecting a healthy pause in the market due to lingering concerns on the Cyprus bailout,” Steven Neimeth, a money manager at SunAmerica Asset Management in Jersey City, New Jersey, which manages about $12 billion. “It appears that investors are becoming increasingly concerned that financial jitters spread through Italy and Spain.”

Equities slumped even as European governments vowed that the swoop on bank accounts to finance Cyprus’s aid package won’t set a precedent for future rescues, according to a confidential document obtained by Bloomberg News.

European governments and the International Monetary Fund agreed Monday to loan Cyprus 10 billion euros ($13 billion) as long as the country liquidated its second-largest bank and forced losses on bank bondholders and deposits of more than 100,000 euros.

Home Sales

Fewer Americans signed contracts to purchase previously owned homes in February, as limited inventory and access to credit held back a more robust recovery in housing. The index of pending home sales fell 0.4 percent to 104.8, the second-highest level since April 2010, after a revised 3.8 percent increase the prior month, the National Association of Realtors reported.

“Housing is getting better,” John Fox, a Cobleskill, New York-based fund manager and director of research at Fenimore Asset management, which manages about $1.5 billion, said over the phone. “There’s absolutely no question about that if you look at all the data, not just one month. Investment is starting to come back and one of those legs is housing.”

Record Highs

The S&P 500 (SPX) rallied yesterday to within two points of its record of 1,565.15 reached in October 2007. The benchmark gauge has surpassed the 1,560 level on six days since March 14, only to fall short of the record each time. The Dow climbed to another record yesterday, after first surpassing its 2007 all- time high on March 5.

The bull market in equities entered its fifth year this month as the S&P 500 more than doubled from its bottom in 2009, driven by an unprecedented three rounds of bond purchases by the Federal Reserve. The S&P 500 is up 9.3 percent for the year.

Financial and raw-material shares retreated the most out of 10 S&P groups, losing at least 0.6 percent. JPMorgan slid 1.7 percent to $47.80 and Citigroup fell 0.9 percent to $44.43. EBay Inc. dropped 1.7 percent to $51.20.

Cliffs Natural

Cliffs Natural Resources plunged 13 percent to $18.58. Morgan Stanley cut its recommendation on shares of the biggest U.S. iron-ore producer to underweight, the equivalent of sell, from equal weight. The company’s iron-ore business will be halved in the coming years because of increased supply in the Great Lakes area, analysts led by Evan Kurtz wrote in a note.

Separately, Credit Suisse Group AG cut its 12-month estimate on the share price to $10 from $20, while maintaining an underperform rating.

Dollar General fell 2 percent to $51.19. The discount retailer said 30 million of its shares will be sold in an underwritten secondary public offering. The offer is by certain existing shareholders and no shares are being sold by the company, Goodlettsville, Tennessee-based Dollar General said in a statement.

Best Buy Co. dropped 1.9 percent to $22.27. S&P Capital IQ cut its rating on the electronics retailer to sell from hold.

Mattress Firm Holding rallied 9.4 percent to $33.95. Raymond James equity analyst Budd Bugatch lifted his rating on the Houston-based retailer to outperform from market perform.

SAIC advanced 5.3 percent to $13.50 after the eighth- largest contractor to the U.S. government said late yesterday it will pay a special dividend of $1 per share. The company forecast full-year earnings of $1.16 to $1.33 a share.

AOL Inc., the Web publisher that owns the Huffington Post and TechCrunch, climbed 8.2 percent to $39.13. Barclays raised its rating on the company to overweight from equalweight, noting that modest revenue growth and streamlining of its cost structure will provide upside support.

- Sarah Pringle in New York at Bloomberg.