U.S. stocks erased gains in the final minutes of trading Thursday as investors prepared for rebalancing of benchmark indexes and the Senate voted to keep $85 billion of spending cuts in place.
The Standard & Poor’s 500 Index lost 0.1 percent to 1,514.68 at 4 p.m. in New York, erasing a gain of as much as 0.6 percent. The index climbed 1.1 percent in February for its fourth straight month of gains.
The Dow Jones Industrial Average slid 20.88 points, or 0.2 percent, to 14,054.49. The measure earlier climbed to within 16 points of its October 2007 record.
“Overall I think the market’s just going through some consolidation here,” Eric Marshall, who helps oversee $900 million as head of research and portfolio manager at Hodges Capital Management in Dallas, said in a phone interview. “People are still nervous and you’ve seen the market kind of re-build a wall of worry here over the last week. In some cases, sequestration’s been the excuse to take profits.”
Equities erased gains after the Senate rejected a pair of partisan proposals to replace $85 billion in automatic spending cuts, known as sequestration, scheduled to start tomorrow. No additional congressional action is planned before the start of the cuts, to be split between defense and non-defense spending. President Barack Obama has summoned congressional leaders to the White House Friday to discuss the next step.
MSCI Inc. at the close of trading Thursday was to make changes to global and U.S. equity indexes, a process known as rebalancing that can lead to swings in affected stocks.
Stocks rallied earlier as revised figures from the Commerce Department showed gross domestic product grew at a 0.1 percent annual rate, up from a previously estimated 0.1 percent drop. Economists predicted a 0.5 percent gain. Jobless claims fell to 344,000 in the week ended Feb. 23. The median forecast called for 360,000 applications. Business activity in the U.S. unexpectedly expanded in February at the fastest pace in almost a year.
The S&P 500, which is trading at about 3 percent below its record, has gained 6.2 percent this year as lawmakers agreed on a compromise on taxes and amid better-than-estimated earnings. About 74 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.9 times reported earnings, below the average since 1954 of 16.4.
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