U.S. Stocks Decline as Investors Await Fed

U.S. stocks declined, sending the Standard & Poor’s 500 Index down for a third day, as investors awaited a Federal Reserve announcement that may signal more stimulus for the world’s largest economy.

Coal and railroad companies slumped as Alpha Natural Resources Inc. (ANR) tumbled 7.5 percent after cutting its 2011 shipment forecast. The Dow Jones Transportation Average, a proxy for the economy, lost 2.7 percent. Oracle Corp. (ORCL) climbed 7.4 percent as profit topped analysts’ estimates. Adobe Systems Inc. (ADBE), the largest maker of graphic-design software, jumped 2.4 percent after its sales forecast exceeded projections.

The S&P 500 fell 0.6 percent to 1,194.97 at 10:54 a.m. New York time. The index swung between gains and losses through the first hour of trading, rising briefly after a larger-than- forecast increase in home sales. The Dow Jones Industrial Average lost 50.90 points, or 0.5 percent, to 11,357.76.

“The market is on hold,” Peter Tuz, who helps manage $1 billion as president of Chase Investment Counsel in Charlottesville, Virginia, said in a phone interview. “The idea of ‘Operation Twist’ is to keep longer rates lower and even push them down. Some sort of action is priced in. As for the effect on the economy, who knows? Interest rates are too low already.”

Stocks fell yesterday on speculation Greece wasn’t closer to receiving more aid. Between April 29 and Aug. 8, the S&P 500 lost as much as 18 percent amid concern about global growth. Since then, the index has risen 7.4 percent through yesterday.

Fed Statement
The Federal Open Market Committee may announce a plan to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds in a bid to lower rates for mortgages, auto and consumer loans, according to 71 percent of 42 economists surveyed by Bloomberg News. The Fed is scheduled to issue its policy statement at about 2:15 p.m. in Washington.

The expected plan, which would lengthen the average duration of bonds in the Fed’s portfolio, would mimic a policy in 1961 known as “Operation Twist” for its goal of bending the yield curve. Within the first month, the program may push down the yield on the 10-year Treasury security by 0.15 percentage point, said Chris Rupkey, chief financial economist of Bank of Tokyo-Mitsubishi UFJ Ltd., in New York.

“We’re going to see a QE2 and a half or what folks have been calling Operation Twist,” Philip Orlando, the New York- based chief equity market strategist at Federated Investors Inc., which oversees about $355 billion, said in a telephone interview. “The bond market is anticipating something along these lines. That’s not priced into stocks. If they’re successful, a stock market rally and an enhanced wealth effect will create additional spending and job creation.”

‘Further Harm’
Republican lawmakers urged Federal Reserve Chairman Ben S. Bernanke to refrain from additional monetary easing to avoid “further harm” to the U.S. economy, saying Americans have reason to be “skeptical” of his plans.

Stocks briefly rose today as figures from the National Association of Realtors showed that sales of previously owned U.S. homes rose more than anticipated in August as investors used cash to buy distressed properties.

“Today’s figure can be seen as old news,” Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, wrote in an e-mail. The data “reflects contract signings that took place in May and June, well before much changed in the global economy.”

Coal Producers, Railroads
Alpha Natural Resources fell 7.5 percent to $24.91. The Abingdon, Virgina-based coal company cut its 2011 shipment forecast to 103 million to 110 million tons from a range of 104 million to 112 million tons. The mining company said it reduced shipments to Asia and had lower production from some of its mines. Arch Coal Inc. (ACI) lost 6.7 percent to $16.82, Patriot Coal Corp. (PCX) retreated 9.1 percent to $10.37.

Railroads also fell. CSX Corp. (CSX), the biggest eastern U.S. railroad, slumped 6.4 percent to $18.93. Union Pacific Corp. declined 3.1 percent to $85.65.

Walter Energy Inc. (WLT) tumbled 9.6 percent to $67.80. The coal producer that bought Western Coal Corp. in April, lowered its second-half sales forecast because of delays at mines in British Columbia and Alabama.

Oracle rose 7.4 percent to $30.44. Fiscal first-quarter earnings excluding some items were 48 cents a share. That exceeded the average estimate of analysts surveyed by Bloomberg. Forecasts for this quarter’s profit also topped predictions.

Adobe gained 2.4 percent to $25.24. The company’s forecast reassured investors who were concerned that the economic slump had sapped demand for Adobe’s products, said Chad Bartley, an analyst at Pacific Crest Securities Inc. in Portland, Oregon. Adobe, which sells software for designers and photographers, as well as programs that help corporate customers manage documents, had seen shares tumble 20 percent this year.