U.S. Stocks Retreat as Treasuries

U.S. Stocks Retreat as Treasuries, Dollar Gain on Housing Data

Share Business ExchangeTwitterFacebook| Email | Print | A A A

By Nick Baker

June 16 (Bloomberg) -- U.S. stocks fell, Treasuries gained and the dollar strengthened against the euro after reports showed American housing starts declined the most in 14 months and FedEx Corp.’s profit forecast trailed estimates. Oil rose to a six-week high.

The Standard & Poor’s 500 Index slipped 0.1 percent to 1,114.61 at 4 p.m. in New York as about three stocks slumped for every two that rallied on U.S. exchanges. The measure had fallen as much as 0.7 percent earlier. Yields on 10-year Treasuries lost 4 basis points to 3.26 percent. The U.S. currency climbed 0.2 percent to $1.2312. Crude oil futures rose 0.9 percent to $77.67 a barrel.

Retailers, manufacturers, transportation companies and commodity producers dropped in U.S. stock trading as FedEx’s full-year profit outlook and the biggest drop in housing starts since March 2009 overshadowed better-than-estimated growth in industrial production. BP Plc’s 1.4 percent gain in New York equity trading following an agreement to pay $20 billion to victims of the Gulf of Mexico oil spill wasn’t enough to turn the S&P 500 around.

“The recovery is not accelerating, it’s decelerating, and there’s reasons for investors to take a step back and evaluate,” said David Kovacs, head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $19 billion. FedEx “is a barometer of economic activity, and the fact that they missed relative to estimates indicates there are some clouds on the horizon.”

‘Moderate’ Recovery

FedEx, the world’s largest air-cargo carrier, declined 6 percent in U.S. stock trading for the biggest drop since December. The company forecast annual profit that trailed the average analyst estimate as labor costs climb in a “moderate” economic recovery. Indexes of consumer stocks in the S&P 500 lost more than 0.5 percent.

Fannie Mae and Freddie Mac, the mortgage firms 80 percent owned by U.S. taxpayers, plunged after regulators told them to delist their common and preferred shares from the New York Stock Exchange. Fannie Mae dropped 39 percent and Freddie Mac slumped 38 percent.

Speculation that BP would put the $20 billion into an escrow account helped its shares as well as the S&P 500 recover from losses. BP maintained gains even after canceling its $10- billion-a-year dividend for the first three quarters of 2010.

Credit investors are pricing in a 36 percent chance BP Plc will default within five years as it tangles with the Obama administration over cleanup costs and claims for the biggest oil spill in U.S. history.

BP Swaps

The default risk implied by credit-default swaps is up from 7 percent a month ago, according to CMA DataVision prices using a standard model used to value the derivatives. BP swaps climbed 70.5 basis points to 576.5. BP debt due next year traded today at distressed levels, with investors demanding as much as 1,251 basis points in yield more than Treasuries.

Oil rose to a six-week high after gasoline surged on a report that U.S. refineries cut operating rates and supplies of the motor fuel fell. Refineries operated at 87.9 percent of capacity, down 1.2 percentage points from the week before. Gasoline supplies fell 636,000 barrels to 218.3 million, the Energy Department said. Analysts surveyed by Bloomberg News were split over whether stockpiles of the fuel would rise or fall.

Three erroneous orders in Washington Post Co. shares briefly caused the stock to double, making it the first U.S. company to be halted by circuit breakers imposed following the May 6 crash that erased $862 billion from equities in 20 minutes.

Canceled Trades

The trades totaling 766 shares at $919.18 or $929.18 crossed on NYSE Euronext’s NYSE Arca electronic platform, according to data compiled by Bloomberg. That compared with a price of $462.84 before the jump. The transactions were later canceled, the data show.

The Securities and Exchange Commission trading curbs started going into effect on June 11. The program, which is being tested through December, pauses Standard & Poor’s 500 Index stocks for five minutes when they rise or fall 10 percent in five minutes or less. Washington Post jumped 103 percent to $929.18 before the halt, then traded at $458.19 as of 4 p.m. in New York after the trading ban stopped.