US stocks lost ground yesterday, as investors drew back from recent gains that lifted the S&P 500 to a five-year high, in anticipation of sluggish growth in corporate profits.
Shares of financial companies dipped after a group of major US banks agreed to pay a total of $8.5bn (£5.3bn) to end a government inquiry into faulty mortgage foreclosures. The KBW bank index, a gauge of US bank stocks, was down 0.3 per cent.
Other sectors were hit as well, most notably energy and utilities. The S&P 500 energy sector index fell 0.8 per cent and the utilities sector was off 1.1 per cent.
The day’s decline came a session after the S&P 500 finished at a five-year high, boosted by a budget deal and strong economic data. The S&P 500 rose 4.6 per cent last week, the best weekly gain in more than a year.
Earnings are expected to be only slightly better than the third-quarter’s lacklustre results, and analysts’ current estimates are down sharply from where they were in October. Fourth-quarter earnings growth is expected to come in at 2.8 per cent, according to Thomson Reuters data.
Aluminium company Alcoa begins the reporting season by announcing its results after today’s market close. Alcoa shares fell 1.7 per cent at $9.10.
The Dow Jones industrial average dropped 50.92 points, or 0.38 per cent, to 13,384.29. The Standard & Poor’s 500 Index fell 4.58 points, or 0.31 per cent, to 1,461.89. The Nasdaq Composite Index lost 2.84 points, or 0.09 per cent, to 3,098.81.
Ten mortgage servicers – including Bank of America, Citigroup, agreed yesterday to pay $8.5bn to end a case-by-case review of foreclosures required by US regulators.
In a separate case, Bank of America also announced roughly $11.6bn of settlements with mortgage finance company Fannie Mae and a $1.8bn sale of collection rights on home loans.
The bank also entered into agreements with Nationstar Mortgage Holdings and Walter Investment Management to sell about $306bn of residential mortgage servicing rights.
Bank of America shares lost 0.2 per cent at $12.09 while Nationstar Mortgage Holdings jumped 16.8 per cent to $38.83.
Citigroup shares were up 0.09 per cent to $42.47, and Wells Fargo shares fell 0.5 per cent to $34.77.
Shares of US jet maker Boeing dropped 2 per cent after a Boeing 787 Dreamliner aircraft with no passengers on board caught fire at Boston’s Logan International Airport yesterday.
Amazon.com shares hit their highest price ever at $269.22 after Morgan Stanley raised is rating on the stock. Shares closed up 3.6 per cent at $268.46.
Video-streaming service Netflix shares gained 3.4 per cent to $99.20.