NEW YORK (BLOOMBERG) - US stocks slipped amid growing speculation that the Federal Reserve will raise interest rates this year, undermining demand for riskier assets, while results from Alcoa Inc. disappointed.
Alcoa lost 6.9 per cent after reporting a profit and sales that missed analysts' estimates. The aluminum producer will split into two companies next month. Apple added 2 per cent, poised to extend its longest winning streak in two months after Samsung Electronics Co. ended production of a troubled smartphone that was supposed to compete with the iPhone.
The S&P 500 Index fell 0.3 per cent to 2,157.54 at 9:33 a.m. in New York (9:33 p.m Singapore time) , after capping its third gain in four days on Monday. The Nasdaq 100 Index declined 0.2 percent following a fresh record, its 13th this year and the most since the tech bubble.
"Alcoa is always the first off and seen as a bellwether for industrial demand," Chris Gaffney, president of world markets at St. Louis-based EverBank, said by phone.
Traders boosted odds for a December hike to 68 per cent, from 64 per cent on Friday and about 50 per cent two weeks ago as encouraging data signaled the US economy is strong enough to cope with higher borrowing costs. They are pricing in a 19 percent chance of a move next month.
Chicago Fed President Charles Evens told reporters in Sydney that a December move "could be fine," after arguing in a speech to keep rates low until core inflation moves higher.
The S&P 500 trades at more than 18 times estimated earnings, compared with a 15.6 average for the past five years. Now that Alcoa has unofficially kicked off the earnings season, investors will be looking for signs of sustainable profit growth at S&P 500 members. While analysts forecast a 1.6 per cent contraction in third-quarter profits at the gauge's members, US firms have beaten projections by an average margin of 3.6 percentage points in the past five years.
Investors will also look this week to minutes from the Fed's September meeting, which will be released on Wednesday, and retail sales, producer prices and consumer sentiment reports due Friday, for clues on the health of the world's biggest economy and the likely trajectory of interest rates.