U.S.Stocks Fall, but on Track to Gain for Year

By Saumya Vaishampayan And Alexandra Scaggs 

        U.S. stocks fell on Tuesday but were on track to notch another year of gains fueled by a brightening economic outlook.
        Major U.S. indexes followed European and Asian stocks lower. The prospect of renewed political turmoil in Greece, the epicenter of the eurozone debt crisis of 2010-2011, unnerved some investors.
        The Dow Jones Industrial Average lost 55.16 points, or 0.3%, to 17983.07. The S&P 500 index declined 10.22 points, or 0.5%, to 2080.35.
        For the year, the S&P 500 has risen 12.6%, while the Dow industrials are up 8.5%, on track for their sixth straight year of gains. Stocks' bull run has been driven by accelerating growth in the U.S. and surprisingly strong corporate earnings.
        The U.S. economy grew at a 5% annual rate in the third quarter, marking the strongest pace in 11 years. Also lifting stocks is the expectation that the Federal Reserve will take a go-slow approach to raising interest rates.
        "If companies keep making money the way they have been...I see no reason stocks can't keep pushing higher," said David Lebovitz, global market strategist for J.P. Morgan Funds, the mutual-fund arm of J.P. Morgan Chase & Co.
        Mr. Lebovitz said he didn't think the instability in Greece would roil U.S. markets. Greece's parliament on Monday failed to elect a new president, setting the stage for snap elections in January. Some investors are concerned that political parties running on antiausterity platforms could come to power, a development that could potentially lead to strife over the country's multibillion-euro bailout program and revive questions about the integrity of the eurozone.
        "What's going on in Greece right now is a problem that's specific to Greece," Mr. Lebovitz said. There isn't "the same element of contagion that existed when we were talking about the banks and sovereign debt."
        Volume was light ahead of the New Year's holiday, with about 4.64 billion shares trading. That's about three-quarters of 2014's average daily volume.
        The Nasdaq Composite Index fell 29.47 points, or 0.6%, to 4777.44.
        Stocks declined in international markets. Japanese stocks fell 1.6% in their last trading day of 2014 but have gained 7.1% for the year. The Stoxx Europe 600 lost 0.9%.
        However, European bond markets shrugged off concerns about Greece. Yields on riskier eurozone bonds declined, with Spain's 10-year yield falling to a record low of 1.59%. When bond yields fall, prices rise.
        In the U.S., the S&P 500 was led lower by the utilities sector, this year's best performer. Shares of utility companies fell 2.1%, but have gained 26.6% this year. Caterpillar fell $1.12, or 1.2%, to 92.59, weighing on the Dow.
        In economic news, data released Tuesday showed home prices rose in October, though the pace of gains slowed. The home-price index covering the entire U.S. rose 4.6% in the year ended October, according to the S&P/Case-Shiller Home Price Index report. That is down from a 4.8% rise in September.
        The U.S. economy has recovered sufficiently for the Fed to begin weighing an eventual interest-rate increase. At the same time, growth concerns have prompted policy makers to introduce new stimulus in China and Japan. European Central Bank officials also have opened the door to further stimulus.
        "Conditions are much better for U.S. companies than for European and Asian companies," said Chris Gaffney, senior market strategist at EverBank Wealth Management. "Earnings will support this market."
        Since U.S. stocks are trading above long-term average valuations, many strategists say that further gains will come primarily from earnings growth. Analysts expect earnings for companies in the S&P 500 will grow 7.2% in 2015, according to FactSet.
        Strategists say the Fed's unprecedented stimulus after the financial crisis tamped down volatility in the stock market, and pushed the S&P 500 to a roaring rally last year. But the Fed has wound down its bond-buying program, and investors now expect an interest-rate increase in 2015. That could spark more volatility in stocks, said Dan Greenhaus, chief strategist at New York brokerage firm BTIG.
        "The fact is that we should have our first rate hike since 2006," he said. "How markets will react...is a big unknown."
        He noted that this year's advance has been bumpier than last year's remarkably steady rally. This year brought a handful of brief, sharp declines on worries about global economic growth. An unexpectedly steep decline in oil prices prompted a 7.4% decline in the S&P 500 from mid-September through mid-October.
        Crude-oil futures on Tuesday rose nearly 1% to $54.12 a barrel.
        Demand for U.S. safe-haven assets rose as investors squared positions for the end of the year. Gold futures added 1.6% to $1200.20 an ounce. Treasurys gained, pushing the yield on the 10-year note down to 2.191%.
        In corporate news, Civeo tumbled 4.35, or 53%, to 3.92 after it said it would slash spending and suspend its quarterly dividend amid the slide in oil prices.
        American Realty Capital Properties shares gained 63 cents, or 7.4%, to 9.11. The hedge fund firm Corvex Management LP, run by activist investor Keith Meister, has disclosed a 7.1% stake in American Realty. Shares took a hit earlier this year after the company admitted it had overstated its financial results and tried to hide the problem.
        Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and Alexandra Scaggs at alexandra.scaggs@wsj.com
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        (END) Dow Jones Newswires

        December 30, 2014 18:00 ET (23:00 GMT)

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