Best Buy, financials knock Wall Street off new high

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks modestly came off their fresh highs from a day earlier in the wake of a stunning drop on Thursday in shares of retailer Best Buy.

Best Buy Co Inc plunged 27 percent to $27.43, easily the worst performer on the benchmark S&P 500, after the No. 1 consumer electronics chain reported a drop in holiday sales and forecast a bigger-than-expected decline in quarterly operating margins.

Financials stocks also weighed on the Dow and S&P indexes.

Goldman Sachs shed 1.5 percent to $176 as the biggest drag on the Dow, while Citigroup Inc dropped 3.3 percent to $53.20 as the biggest weight on the S&P 500. The S&P financial index <.SPSY> lost 0.5 percent, the worst performer among the 10 major S&P sectors.

 

After a lackluster start to 2014 on concerns stock valuations may too high after a 30-percent rally in the S&P 500 <.SPX> last year, the index surged 1.6 percent over the past two sessions to a fresh high Wednesday, its first since December 31.

The Dow Jones industrial average <.DJI> fell 56.77 points, or 0.34 percent, to 16,425.17, the S&P 500 <.SPX> lost 4.15 points, or 0.22 percent, to 1,844.23 and the Nasdaq Composite <.IXIC> dropped 1.61 points, or 0.04 percent, to 4,213.273.

UnitedHealth Group Inc weighed on the Dow even as the largest U.S. health insurer reported a higher fourth-quarter profit and the addition of 170,000 members, and said 2014 earnings would improve. Its shares fell 2.8 percent to $72.70.

CSX Corp slumped 7.1 percent to $27.15 after the railroad late Wednesday posted a smaller fourth-quarter profit on weak coal volume.

Apollo Global Management LLC said it would buy CEC Entertainment Inc , the parent of Chuck E Cheese restaurant chain, for about $948 million. CEC shares jumped 12.7 percent to $54.60.

Twelve companies in the S&P 500 are scheduled to report on Thursday, including chipmaker Intel Corp after the close.

Data pointed to an economy that continues to grow at a slow, but steady pace.

The consumer price index increased 0.3 percent after being flat in November while the core CPI, which strips out volatile food and energy prices, rose only 0.1 percent, slowing from a 0.2 percent gain in November, which suggested underlying inflation is muted.

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 326,000 and claims for the prior week were revised to show 2,000 fewer applications received than previously reported, suggesting a sharp slowdown in job growth in December was likely to be temporary.

"We've made a nice run and the market is entitled to consolidate and use sort of a 'wait-and-see' attitude as far as earnings are concerned," said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.

Other data showed homebuilder confidence faded a bit at the start of 2014, as the The NAHB/Wells Fargo Housing Market Index dipped to 56 points in January from a downwardly revised 57 in December.

The Philadelphia Federal Reserve Bank said its business activity index stood at 9.4 points in January compared with 6.4 in December and beating the median forecast of 8.6 of economists for January, but firms' outlook for the months ahead worsened.

(Editing by Nick Zieminski and Bernadette Baum)