Jan. 13 (Bloomberg) — U.S. stocks were little changed as investors assessed prospects for economic and corporate earnings growth after the Standard & Poor's 500 Index rallied the most last year in more than a decade.
Lululemon Athletica Inc. slumped 17 percent after the sportswear maker lowered its profit and sales forecast. Symantec Corp. lost 2.5 percent as Morgan Stanley recommended investors sell the shares. Beam Inc. jumped 24 percent after Suntory Holdings Ltd. said it will acquire the spirits maker in a $16 billion deal. Juniper Networks Inc. rallied 9 percent after the maker of computer-networking equipment was said to be targeted by activist hedge fund Elliott Management Corp.
The S&P 500 added less than 0.1 percent to 1,842.71 at 10:09 a.m. in New York. The Dow Jones Industrial Average rose 6.93 points, or less than 0.1 percent, to 16,443.98 today.
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"Sentiment is extremely optimistic and that's a negative for stocks," Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $105 billion. "That means for the short term they're fully invested. Stocks have entered the new year overbought and over-believed and until we digest that, we're likely to stay in this range."
The S&P 500 has dropped 0.3 percent so far in 2014, despite last week's 0.6 percent advance. It ended last year at a record level, having climbed 30 percent for its biggest annual rally since 1997.
JPMorgan earnings
JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., and Citigroup Inc. are among 29 members of the S&P 500 to report quarterly results this week. Earnings for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analyst estimates compiled by Bloomberg.
The S&P 500 trades at 15.6 times the estimated earnings of its members, more than the average multiple of 14.1 over the last five years, data compiled by Bloomberg show. The gauge ended 2013 at its highest valuation since the end of 2009.
"The way to think about the market is the level of earnings and the multiple which should be applied to that earnings growth," David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., told Manus Cranny on Bloomberg Television. "Those really are the fundamental drivers of the level of U.S. equity markets this year. Earnings growth is likely to be the principal source of return for U.S. investors because, historically speaking, the market is trading at a pretty elevated level."
The equity benchmark will remain within a range of five percent below or above the 1,800 level as investors assess how economic growth and earnings interact with increasing Treasury yields, according to Deutsche Bank AG's David Bianco. The New- York based chief U.S. equity strategist forecasts that the S&P 500 will end this year little changed at 1,850.
Fed stimulus
Three rounds of monetary stimulus from the Federal Reserve have helped push the S&P 500 higher by 172 percent from a 12- year low in 2009. The Fed, which next meets Jan. 28-29, last month announced a reduction in its monthly bond-buying program, citing a recovery in the labor market.
The S&P 500 increased on Jan. 10 after a report from the Labor Department showed employment rose in December at the slowest pace in almost three years, easing concern the Fed will accelerate the pace of stimulus cuts. The data ended months of improving job growth that had signaled the world's largest economy was picking up.
Atlanta Fed President Dennis Lockhart is scheduled to speak today. Charles Plosser from the Philadelphia Fed and Richard Fisher from Dallas speak tomorrow. Plosser and Fisher are voting members of the Federal Open Market Committee this year.
Volatility index
The Chicago Board Options Exchange Volatility Index, which measures expected swings on the S&P 500 using options prices, fell 1.5 percent to 11.96. The gauge fell 12 percent last week to its lowest level since Aug. 5.
Lululemon slumped 17 percent to $49.70 today after projecting earnings for the period ending Feb. 2 of 71 cents to 73 cents a share, down from a previous range of 78 cents to 80 cents. The yoga-wear retailer estimated that sales for the period will reach $513 million to $518 million. The company had predicted sales of at least $535 million.
Symantec drops
Symantec fell 2.5 percent to $22.88 after Morgan Stanley lowered its rating on the stock to underweight from equal weight. The brokerage predicted that revenue would rebound more slowly as Symantec reorganizes its sales force, potentially limiting its profitability.
Intercept Pharmaceuticals Inc. plunged 17 percent to $369 after the stock soared more than sixfold last week. Intercept Chief Executive Officer Mark Pruzanski said the company may consider working with a bigger drugmaker to develop its experimental treatment.
Beam jumped 24 percent to $83.07. Osaka-based Suntory will pay $83.50 per share in cash and take over all of Beam's outstanding debt, according to a joint statement. The companies said they expect to complete the deal by the end of June.
Juniper Networks climbed 9 percent to $25.65. The company has been targeted by Elliott Management, a New York fund run by billionaire Paul Singer, which will seek cost cuts, stock buybacks and other changes, two people familiar with the matter said. Elliott is seeking talks with management and the company's board, the people said.
Twitter Inc. rose 3.9 percent to $59.20. Goldman Sachs & Co. analyst Heath Terry raised the stock's 12-month price target to $65 a share from $46, citing the social-network company's "significant acceleration" in innovation during the fourth quarter. Twitter has seen five trading sessions of declines, falling 17 percent last week.
MGM Resorts International increased 2.3 percent to $25.93 as Bank of America Corp. upgraded the company to buy from neutral. The stock posted its best week in eight months last week, completing its longest streak of weekly gains since February 2012.
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