US stocks fell yesterday after the S&P 500 hit its highest level in four years as the benchmark index faced technical resistance and traders cashed in recent gains.
The S&P 500 index hit 1,426.68, its highest intraday rise since May 2008. Volume has been light, as expected in August, and only three of the past 12 sessions have seen moves of 0.25 per cent or more by the S&P.
“It’s not uncommon that you run into some resistance at new highs,” said Jim Paulsen, chief investment officer at Wells Capital Management.
“Traders sort of play for a while to see which way the market is ultimately going to resolve itself.”
Stocks rose early in the session and the euro rallied to a seven-week high against the US dollar, bolstered by talk that the European Central Bank will act to lower Spanish and Italian borrowing costs. Bets on action from central banks in support of their stalling economies have helped move stocks higher.
However, US stocks lost momentum after the first hour as traders took profits.
The slow but steady climb over the past six weeks was partly due to better-than-expected data, including payrolls, retail sales and housing numbers that countered a previous string of disappointments.
“The US economy is showing signs of picking up again,” said Paulsen.
The Dow Jones industrial average fell 68.06 points, or 0.51 per cent, to 13,203.58. The S&P 500 Index dropped 4.96 points, or 0.35 per cent, to 1,413.17. The Nasdaq Composite lost 8.95 points, or 0.29 per cent, to 3,067.26. The CBOE Volatility Index or VIX was up 7.4 per cent at 15.05 after hitting a five-year low of 13.30 last week.