Stocks Drop as Job Data Signal Slower U.S. Recovery
Trader Robert Gross works on the floor of the New York Stock Exchange. Photographer: Ramin Talaie/Bloomberg
Aug. 12 (Bloomberg) -- John Chambers, chief executive officer of Cisco Systems Inc., talks about the company's performance and first-quarter sales forecast. The world's largest maker of networking equipment forecast sales that missed analysts' estimates and said the recovery may be slowing. Chambers talks with Betty Liu and Jon Erlichman on Bloomberg Television's "In the Loop." (This is an excerpt of the full interview. Source: Bloomberg)
Aug. 12 (Bloomberg) -- Charles McQuaid, manager of the Columbia Acorn Fund, discusses investment strategy and the performance of industrial stocks. McQuaid talks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
Aug. 12 (Bloomberg) -- Ad van Tiggelen, a senior strategist at ING Investment Management, talks about his strategy and his focus on "high dividend" stocks including telecommunications and pharmaceutical companies. He speaks from The Hague with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Aug. 11 (Bloomberg) -- Colin Fenton, chief executive officer of Curium Capital Advisors, talks about the outlook for commodities and investment strategy. Fenton speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Aug. 12 (Bloomberg) -- Atul Lele, an equity strategist at Credit Suisse Group AG, talks about his investment strategy for global stocks. U.S. stocks dropped the most in three weeks as equities retreated from Tokyo to Moscow and London amid speculation the Federal Reserve’s stimulus plan indicates the economic recovery is in jeopardy. Lele speaks from Sydney with Bloomberg's Rishaad Salamat. (Source: Bloomberg)
Aug. 11 (Bloomberg) -- Tai Hui, the head of Southeast Asian economic research at Standard Chartered Plc, talks about China's economy and central bank monetary policy. Industrial production rose 13.4 percent from a year earlier, the statistics bureau said in Beijing today. Inflation quickened to 3.3 percent, the fastest in 21 months, boosted by a low year-earlier base for comparison and rising food costs. Hui also discusses the outlook for Chinese stocks. He speaks with Bloomberg's Linzie Janis on "Global Connection." (Source: Bloomberg)
Aug. 12 (Bloomberg) -- Matt Marsden, an equity researcher at Samsung Securities (Asia) Ltd., talks about his investment strategy for Hong Kong-traded retail stocks. Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., may buy a Hong Kong-listed transportation affiliate 42 percent owned by its parent as it cuts costs. Marsden speaks with Bloomberg's Rishaad Salamat. (Source: Bloomberg)
U.S. stocks fell and oil dropped after American jobless claims unexpectedly jumped, adding to evidence the economic recovery is weakening. Cisco Systems Inc. tumbled after forecasting sales that missed analysts’ estimates. The Swiss franc and gold rose.
The Standard & Poor’s 500 Index slipped 0.6 percent at 12:05 p.m. in New York. The MSCI Asia Pacific Index slid 1.4 percent, while Germany’s DAX Index and the IBEX 35 Index in Madrid lost 0.3 percent. Oil dropped below $77 a barrel. The franc appreciated against all of its 16 most-traded peers and gold rose to a four-week high as investors sought out assets with less perceived risk.
The decline in stocks pushed the S&P 500’s loss over the last three days to 4 percent, erasing about half the rally that began at the start of July, when U.S. companies reported earnings that beat forecasts. The rise in jobless claims followed the Federal Reserve’s comments Aug. 9 that the recovery is weakening and will require fresh stimulus.
“We’re in a choppy and corrective phase in the market,” said David Darst, the New York-based chief investment strategist at Morgan Stanley Smith Barney, which oversees $1.6 trillion. “Everyone knows the jobs situation is bad while it is company profits that have helped the market, so if profits step off the gas then that’s a tough thing for investors.”
Initial jobless claims unexpectedly rose by 2,000 to 484,000 in the week ended Aug. 7, the highest level since mid February, the Labor Department said today in Washington.
Losing Confidence
Companies may be losing confidence in the recovery and are hesitant to hire, raising the risk of further erosion in consumer spending, the biggest part of the economy. Federal Reserve policy makers this week said growth “is likely to be more modest” than they previously projected, prompting central bankers to take additional steps to spur a rebound.
“One can only assume that the Fed is looking at all its options in order to try and provide further stimulus to the economy if it is necessary to do so,” Gary Jenkins, head of credit strategy at Evolution Securities Ltd. in London, wrote in a report.
Cisco, the world’s largest maker of networking equipment, tumbled as much as 12 percent after forecasting sales late yesterday that missed analysts’ estimates and saying the recovery may be slowing.
Spending by global companies on information technology equipment will slow to 4 percent next year as the economy weakens, according to Goldman Sachs Group Inc.
Franc, Treasuries
The Swiss franc advanced at least 1.2 percent against the euro, the dollar and the yen. The dollar rose 0.5 percent to 85.81 yen, trading near its lowest level against the Japanese currency since July 1995. The franc extended gains against the euro after the European Union said the region’s industrial output unexpectedly declined in June.
Treasury two-year note yields were near an all-time low before the U.S. sells $16 billion of 30-year bonds, the last of three auctions this week totaling $74 billion. The yield on the two-year note rose 2 basis points to 0.54 percent, near its record low of 0.4892 percent reached yesterday.
Crude oil dropped for a third day, losing as much as 2.5 percent to $76.05 on the New York Mercantile Exchange. An Energy Department report yesterday showed that U.S. gasoline supplies climbed for a seventh week and stockpiles of distillate fuel, a category that includes heating oil and diesel, advanced to the highest level since January 1983.
Gold, Wheat
Gold futures for December delivery gained $15.40, or 1.3 percent, to $1,214.60 an ounce on the Comex in New York. Earlier, the price reached $1,218.50, the highest level for a most-active contract since July 13. It reached a record $1,266.50 on June 21.
Wheat jumped 2.4 percent after the U.S. Department of Agriculture said world stockpiles will shrink more than forecast as demand rises and a drought in Russia slashes exports. Wheat futures for December delivery rose 17 cents to $7.4225 a bushel on the Chicago Board of Trade, the first increase in a week.
The MSCI Asia Pacific Index slid 1.4 percent, tracking yesterday’s declines in Europe and the U.S., and dragging the Nikkei 225 Stock Average briefly into a bear market. Nintendo Co. and Sony Corp., which get more than 70 percent of their sales from abroad, slumped at least 1.6 percent. The MSCI Emerging Markets Index lost 0.6 percent, bringing the three-day retreat to 3.9 percent, the deepest sell-off since July 1.
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