NEW YORK (Reuters) – Stocks dipped on Wednesday on investor caution after a strong rally in September, but analysts said buying by mutual fund managers to adjust portfolios at quarter-end may lift equities.
Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco, said the market was technically overextended, but a recent pattern of buying on dips could re-emerge as fund managers «window dress» their portfolios.
«Today we might see a little bit of strength,» he said. «The market just kept unrelentingly marching higher, and the more it did that, the more it puts pressure» on fund managers to buy stocks.
The S&P 500 has climbed more than 9 percent since the beginning of the month on signs the economy may avoid a double-dip recession and on renewed hopes the Federal Reserve will take more steps to prop up the economy.
The Dow Jones industrial average (.DJI) dropped 39.13 points, or 0.36 percent, to 10,819.01. The Standard & Poor’s 500 Index (.SPX) dropped 5.98 points, or 0.52 percent, to 1,141.72. The Nasdaq Composite Index (.IXIC) dropped 8.79 points, or 0.37 percent, to 2,370.80.
Over the past several sessions, near-term resistance for the S&P 500 appeared to be building at the 1,149 level, and if it does, it could bring investors back into both equities and options, said Scott Fullman, director of derivative investment strategy at WJB Capital Group in New York.
Hewlett-Packard Co (HPQ.N) rose 1.6 percent to $42.25 after the computer and printer maker forecast 2011 profits above estimates.
Family Dollar Stores Inc (FDO.N) rose 2 percent to $44.21 after the discount retailer posted better-than-expected earnings and issued a bullish forecast.
On the downside, Green Mountain Coffee Roasters Inc (GMCR.O) slid 16 percent to $31 after it disclosed that regulators were looking into its accounting practices.