U.S. Stocks Drop on Concern Over Spain, Manufacturing Slowdown
A trader talks on the phone while working on the floor of the New York Stock Exchange in New York. Photographer: Jin Lee/Bloomberg
Aug. 26 (Bloomberg) -- Doug Cliggott, U.S. equity strategist with Credit Suisse, and John Brady, senior vice president at MF Global, talk about the outlook for U.S. stocks and bonds, Federal Reserve monetary policy and U.S. government fiscal policy. They speak with Matt Miller, Julie Hyman and Dominic Chu on Bloomberg Television's "Street Smart". (Source: Bloomberg)
Aug. 26 (Bloomberg) -- Paul McCulley, managing director at Pacific Investment Management Co., discusses the outlook for Federal Reserve Chairman Ben S. Bernanke's speech tomorrow at the Kansas City Fed's symposium on the economy at Jackson Hole, Wyoming. McCulley talks with Bloomberg's Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance." (Source: Bloomberg)
Aug. 26 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. Stocks fell, sending the Dow Jones Industrial Average below 10,000 for the first time in seven weeks, as concern about Spain’s fiscal stability and a slowdown in manufacturing wiped out early gains triggered by a drop in jobless claims. (Source: Bloomberg)
U.S. stocks fell, sending the Dow Jones Industrial Average below 10,000 for the first time in seven weeks, as concern about Spain’s fiscal stability and a slowdown in manufacturing wiped out early gains triggered by a drop in jobless claims.
Guess? Inc. retreated 11 percent after its forecast trailed analyst estimates. Cisco Systems Inc. and International Business Machines Corp. lost the most in the Dow as 28 of the gauge’s 30 companies retreated after a court ruled Spain’s method of auditing sales tax was illegal and the Federal Reserve Bank of Kansas City said manufacturing growth stalled in the region.
The Standard & Poor’s 500 Index fell 0.8 percent to 1,047.22 as of 4 p.m. in New York. The Dow lost 74.25 points, or 0.7 percent, to 9,985.81. It was the lowest close since July 6 for both gauges. Decliners outnumbered advancers by more than two to one on U.S. exchanges.
“We’ve always expected this mid-year deceleration of the economy, and you see that in the Kansas City data,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “There’s very soft demand for risk at this point. It’s not insignificant money either in terms of Spain.”
The S&P 500 has tumbled 14 percent from its 2010 high on April 23, amid concern the economic recovery is slowing. Stocks rose yesterday for the first time in five days as investors speculated the drop overshot the potential damage from a slowdown in the economy.
Gains Erased
Stocks advanced early in today’s session after applications for jobless benefits fell by 31,000, more than forecast, last week, easing concern American employers are again slashing payrolls as the economy slows. Claims dropped to 473,000 in the week ended Aug. 21, Labor Department figures showed today in Washington.
Equities erased gains after El Economista reported that a Spanish court voided 5.1 billion euros ($6.5 billion) in value- added tax collected in past years, spurring concern that the ruling may worsen the European debt crisis.
A spokesman for the government denied the report on El Economista’s website. The Spanish government may see “a few hundred million euros” in tax revenue delayed after a court ruled that its system of auditing sales tax was illegal, a spokesman for the tax agency said.
Stocks also retreated after the Kansas City Fed said manufacturing slowed in August, with no companies reporting month-over-month increases, spurring concern about a slowdown in the economic recovery.
Birinyi Report
Birinyi Associates Inc. lowered its year-end forecast for the S&P 500 by 7.5 percent to 1,225, saying companies from Wal- Mart to Procter & Gamble Co. are unlikely to erase their declines this year.
The new estimate implies a 17 percent advance from today’s closing price and a full-year increase of 9.9 percent. There’s a 20 percent chance the benchmark gauge for U.S. stocks will trade in a range of 1,000 to 1,150, buoyed by corporate buybacks and mergers while dragged down by slower economic growth, according to the report by the research and money-management firm founded by Laszlo Birinyi.
Fed Chairman Ben S. Bernanke will discuss the outlook for the economy tomorrow at the central bank’s annual symposium in Jackson Hole, Wyoming. The Fed will be accommodative for a “very, very long time” and inflation will remain “exceedingly low,” Paul McCulley, managing director at Pacific Investment Management Co., said in an interview today on Bloomberg Radio.
Guess Rallies
Guess? Inc., the Los Angeles-based clothing designer and retailer, late yesterday reiterated its fiscal 2011 forecast for profit of $2.80 to $2.85 a share, excluding items. Analysts were looking for profit of $2.91 for the year ending in January, the average of estimates compiled by Bloomberg. The shares fell 11 percent to $34.14.
Technology shares slumped the most out of 10 groups in the S&P 500, as JDS Uniphase Corp. fell 4.7 percent to $9.74. The maker of fiber-optic equipment reported fourth quarter revenue of $390.9 million, missing the average analyst estimate in a Bloomberg survey of $400.2 million.
Energy companies decreased second-most of 10 groups in the S&P 500. Natural gas futures fell to an 11-month low after an Energy Department report showed that U.S. stockpiles rose more than forecast last week. Marathon Oil Corp., the fourth-largest U.S. energy producer, fell 1.8 percent to $30.21. ConocoPhillips, the third-largest U.S. oil company, slumped 2 percent to $52.41.
Cephalon
Cephalon Inc. lost 2 percent to $56.63 after it announced Frank Baldino Jr., the company’s founder and chief executive officer, will take an immediate leave of absence for medical reasons.
Patterson Cos. fell 4.9 percent to $25.36. The maker of medical supplies reported sales of $849.8 million in the fiscal first quarter, trailing the average analyst estimate of $853.7 million.
Raw materials stocks comprised the only industry group to rally out of 10 in the S&P 500 as copper and aluminum climbed on the London Metal Exchange. Freeport, the world’s largest publicly traded copper producer, added 0.7 percent to $67.11.
Boeing Co. rose 0.9 percent to $61.32. Goldman Sachs Group Inc. raised its fourth-quarter earnings estimate for the Chicago-based planemaker to $1.15 from $1.12 per share. Boeing, which is struggling with delays on the 787 Dreamliner, may improve its profit margins as volume increases and research expenses decline, Goldman said.
Oil, Energy Shares
Crude oil advanced as concern eased about the labor market after the jobless claims report. Anadarko Petroleum Corp. climbed 0.5 percent to $46.96 as oil increased for a second day, rising 1.2 percent to $73.36 a barrel in electronic trading on the New York Mercantile Exchange.
Monster Worldwide Inc. rose second-most in the S&P 500, gaining 4.7 percent to $10.70. SunTrust Robinson Humphrey advised investors to buy shares of the world’s largest online- recruiting company, citing “the increasing reliance that employers are placing on staffing companies as they shift their labor costs in favor of flexibility.”
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