U.S. stock futures were little changed, following the biggest monthly decline for the Standard & Poor’s 500 Index since September, before a report that may show manufacturing expanded at a slower pace in April.
Sears Holdings Corp. (SHLD) rallied 5.1 percent as it forecast a profit after a gain from selling some stores in the U.S. and Canada. Delta Air Lines Inc. rose 2.8 percent after agreeing to buy a refinery from ConocoPhillips (COP), breaking with U.S. carriers’ tradition of not owning their own fuel assets. Expedia Inc. (EXPE), an online-travel company which rose to the highest since at least 2005, lost 2.9 percent as Barclays Plc cut its rating.
Pfizer topped earnings expectations as cost controls helped offset falling sales of its cholesterol drug Lipitor, which now faces competition from generic alternatives. Earlier this month, the drugmaker agreed to sell its baby formula division to Nestlefor $11.85 billion.
And oil producer BP reported a bigger-than-expected earnings decline despite an increase in crude prices, as production fell after it was forced to sell fields to pay for the oil spill.
On the economic front, construction spending for March due to be released at 10:00am ET. And the ISM manufacturing index for April is due to be released at the same time. Economists in a Reuters survey expected a reading of 53.0 versus 53.4 in March.
P.F. Chang’s China Bistro surged after private equity firm Centerbridge Partners said it will acquire the restaurant chain in a deal worth $1.1 billion, a 30 percent premium to the stock’s Monday close.
Delta Airlines announced that it would buy a Pennsylvania oil refinery from ConocoPhillips for $150 million.
The leaders of New York City’s pension funds said they would vote their 4.7 million company shares against five directors standing for re-election to Wal-Mart’s board over concerns about the retailer’s reported cover-up of bribery in its Mexico operations, according to the New York Times.
For all the back and forth in the stock market, the Dow squeezed out a two-point gain in April. It was good enough for the Dow’s seventh straight monthly gain, its longest streak in five years. Considering the blue chips rebounded from a 4.1% decline in the early part of the month, the bulls don’t have much to complain about.
But a closer look at sector performance shows a rotational shift took place, one that could be a bearish indicator. Investors took a more defensive posture in April, shifting toward companies that typically perform better in slow-growth environments.
Telecom and utility stocks – among the worst performers in the first three months of the year – were the biggest gainers in April. Telecom stocks jumped 4.2% and utilities — still the only sector in the red for the year — rose 1.8%. Meanwhile, financials and technology, the S&P 500’s best performing sectors in the first quarter, were the biggest laggards last month, dropping 2.5% and 1.9%, respectively.
Small-cap stocks and transportation stocks, which did well in the first quarter, also underperformed in April. The Russell 2000 index of small-cap stocks dropped 1.6%, its worst-performing month since September. The Dow Jones Transportation Average — an index of 20 airline, railroad and shipping companies and considered a proxy for the economy – dropped 0.4%.
The rotation away from cyclicals and into more defensive and less-volatile stocks doesn’t come as a shock. Duel worries about Europe’s sovereign debt crisis and U.S. economic growth are ramping up again. Meanwhile, another shot of stimulus from the Fed is looking less likely as the end of Operation Twist approaches.
The S&P 500 stumbled at the opening bell and spent most of the day oscillating around the -0.5% level. A weak rally in the final hour got the index up to a 0.39% loss at the close, which gives us a 0.75% loss for the month of April. The index is back below the 1,400 level. For the glass-half-full readers, the index closed the month up 11.16% year-to-date, which is only 1.49% off its interim closing high set on April 2nd, the first business day of the month.
From an intermediate perspective, the S&P 500 is 106.6% above the March 2009 closing low and 10.7% below the nominal all-time high of October 2007.