US stocks fell amid stimulus tapering concerns, trade balance data

U.S. stocks retreated for a second day in a row, giving the Standard & Poor’s 500 Index its biggest decline since June 24, as trade data fueled concern the Federal Reserve may reduce its bond purchases this year.

The S&P 500 lost 0.6% to 1,697.37 at 4 p.m. in New York, extending yesterday’s loss after a record high last week. The Dow Jones Industrial Average decreased 93.39 points, or 0.6%, to 15,518.74.

“Certainly some of the move is due to increased concern about tapering due to the very strong trade number,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in an e-mail to Bloomberg. “It’s puzzling to me why better GDP growth would be bad for the equity market, but there are some who view it this way. Longer term, we need to see revenue growth, and stronger GDP will deliver that.”

Fed Bank of Chicago President Charles Evans, who has been among the strongest supporters of record financial easing, said today he “would clearly not rule” out a decision to begin dialing back the purchases in September.

“Weve seen good improvement in the labor market, there’s no question in my mind about that,” Evans said in a meeting with reporters in Chicago. “I’m still wanting to see greater evidence that it’s a sustainable improvement.”

Economists at Goldman Sachs Group Inc. and Barclays Plc raised their estimates for second-quarter U.S. gross domestic product, motivated by the trade report. A Commerce Department report last week showed the economy grew more than projected in the quarter, with GDP rising at a 1.7% annualized rate after a 1.1% gain the prior quarter.

American Eagle Outfitters sank 12%, the most since May 2010, to $17.57. The teen apparel chain said second-quarter profit was less than it forecast amid disappointing sales of women’s clothing and weak shopper activity.

CVS Caremark slumped 2.8% to $59.89, the biggest decline since June 20. The largest provider of prescription drugs in the U.S. lowered the top end of its full-year adjusted earnings target to $3.96 a share from $4 a share.

J.C. Penney Co. declined 3.9% to $13.28, falling for a sixth straight session to the lowest level since January 2001. The stock has tumbled 20% since July 29.

IBM retreated 2.3% to $190.99 for the biggest drop in the Dow. The world’s largest computer-service company said U.S. employees in its hardware division will take one week vacation with one-third pay starting either Aug. 24 or Aug. 31.