* Energy shares weak after results, oil down 2.3 pct
* Housing shares drop after Toll Bros results
* Office Depot and OfficeMax confirm merger, Staples slumps
* Boeing rallies after Reuters report on battery issue
* Dow off 0.3 pct, S&P 500 off 0.6 pct, Nasdaq off 0.8 pct
By Edward Krudy
NEW YORK, Feb 20 U.S. stocks fell on Wednesday,
pressured by a drop in energy shares as investors found few
reasons to buy equities following a rally that has propelled
indexes close to all-time highs.
Stocks were volatile after minutes from the U.S. Federal
Reserve suggested the central bank may have to slow or stop
buying assets before seeing a pickup in hiring, raising the
prospect of an earlier end to quantitative easing.
"What Wall Street wants to hear is an absolute sign that the
Fed will continue with QE for the indefinite future. When it
says we may end it faster, that just raises the uncertainty and
the market hates that," said Todd Schoenberger, managing partner
at Landcolt Capital in New York.
Energy companies' shares were among the weakest, hurt by
disappointing results in the sector and a 2.3 percent drop in
crude oil prices. The Energy Select Sector SPDR exchange-traded
fund fell 1.2 percent.
The Dow Jones industrial average slipped 36.65
points, or 0.26 percent, to 13,999.02. The Standard & Poor's 500
Index dropped 9.50 points, or 0.62 percent, to 1,521.44.
The Nasdaq Composite Index lost 24.63 points, or 0.77
percent, to 3,188.96.
In the energy sector, Newfield Exploration tumbled
7.7 percent to $25.19 while Devon Energy Corp dropped
4.6 percent to $57.75. Both companies posted fourth-quarter
losses, with Devon hurt as it wrote down the value of its assets
by $896 million because of weak natural gas prices.
Equities have been strong recently. The day's modest decline
was the largest for the S&P 500 since Feb. 4. The index has
jumped about 7 percent so far this year and is on track for its
eighth straight week of gains.
However, many of those weekly gains have been slight, with
equities trading within a narrow range for the past few weeks,
suggesting valuations may be stretched at current levels.
"The market seems very tired and listless, and investors are
prone to take profits now as they wait for the music to stop,"
said Matt McCormick, money manager at Bahl & Gaynor in
Earlier in the day, unconfirmed rumors that a troubled hedge
fund was selling assets added some downward pressure to the
market. The rumors appeared to be unfounded.
"I heard the chatter about a hedge fund liquidating things
today but how big, I don't know. Certainly, it sparks concern,"
said Michael James, senior trader at Wedbush Morgan in Los
Housing shares also declined, pressured by
weaker-than-expected results at Toll Brothers Inc and a
drop in groundbreaking to build new U.S. homes, also known as
housing starts, in January.
Toll Brothers' stock fell 6.1 percent to $34.66, but is up
about 7 percent so far this year, building on a jump of nearly
60 percent in 2012. The Dow Jones U.S. Home Construction index
lost 4.3 percent.
"Valuations appear a bit high at these levels, and if I was
in a name that had seen a huge run, I'd want to take some chips
off the table," said McCormick, who helps oversee about $8.2
billion in assets.
The Dow's losses were limited by Boeing Co, up 1.2
percent at $75.56 after a source told Reuters that the company
had found a way to fix battery problems on its grounded 787
Dreamliner jets. Concerns over that line have weighed on Boeing
recently, contributing to a 2 percent drop in the stock's price
In economic data released on Wednesday, permits for future
home building rose in January to a 4 1/2-year high while a
separate report showed wholesale prices rose last month for the
first time in four months. The U.S. Producer Price Index rose in
January for the first time in four months.
Shares of OfficeMax Inc fell 8.5 percent to $11.87
while Office Depot slid 18.5 percent to $4.09 as the
companies announced a $1.2 billion merger agreement. The shares
had surged in Tuesday's session after a source said a deal would
be announced. Rival Staples Inc fell 5.5 percent to
$13.84 and ranked as one of the S&P 500's biggest decliners.
According to Thomson Reuters data through Tuesday morning,
of the 405 companies in the S&P 500 that have reported results
so far, 71 percent have exceeded analysts' expectations,
compared with a 62 percent average since 1994 and 65 percent
over the past four quarters.
Fourth-quarter earnings for S&P 500 companies are estimated
to have risen 5.7 percent, according to the data, exceeding a
forecast for a 1.9 percent gain at the start of the earnings