Wednesday, May 30, 2012

U.S. Stocks Fall on Greek Woes as Home Data Disappoint

U.S. stocks fell, putting the Standard & Poor’s 500 Index on pace for its worst month since September, after a gauge of pending home sales dropped by the most in a year and concern that Greece will leave the euro grew.
A measure of homebuilders in S&P indexes sank 4.2 percent. Caterpillar Inc. (CAT) and Chevron Corp. (CVX) dropped at least 2.2 percent to pace losses in the largest companies. Morgan Stanley and Citigroup Inc. (C) slid more than 3.3 percent. Research In Motion Ltd. (RIMM) fell 6.9 percent after forecasting a surprise operating loss and hired banks to advise on strategic options. Facebook Inc. (FB) lost 0.1 percent after yesterday’s 9.6 percent slump.
Traders work at the New York Stock Exchange (NYSE) on May 30, 2012. Photographer: Scott Eells/Bloomberg
The S&P 500 retreated 1.2 percent to 1,315.99 at 11:46 a.m. New York time. The benchmark gauge has fallen 5.9 percent so far in May. The Dow Jones Industrial Average slipped 146.98 points, or 1.2 percent, to 12,433.71 today. Trading in S&P 500 companies was down 14 percent from the 30-day average at this time of day.

“It’s a high-anxiety market,” said Hayes Miller, who helps oversee about $48 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc. “We’re not anywhere near the end of Europe’s debt crisis. In the U.S., economists are making the point that if housing were to stabilize, consumption could grow. The question is: what’s going to allow the housing market to stabilize?”
Global stocks slumped while U.S. Treasury 10-year yields slid to a record and the euro weakened to a two-year low. An opinion poll showed most Greeks want to see the terms of an international financial rescue revised. In the U.S., the index of pending home resales dropped 5.5 percent, figures from the National Association of Realtors showed today. The median forecast of economists surveyed called for no change.

Direct Aid

Earlier today, equity futures briefly pared losses as the European Commission called for direct euro-area aid for troubled banks, and touted a Europe-wide deposit-guarantee system and common bond issuance as antidotes to the debt crisis now threatening to overwhelm Spain.
“What you’re seeing is worry about how this really plays out and whether Europe has the ability to even solve the problem at this point,” said Madelynn Matlock, who helps oversee about $14.7 billion at Huntington Asset Advisors in Cincinnati.
The Morgan Stanley (MS) Cyclical Index of companies most-tied to the economy lost 2.4 percent. Builder Lennar Corp. (LEN) slumped 5.4 percent to $27.20, while D.R. Horton Inc. retreated 4.2 percent to $16.71. Caterpillar slid 2.2 percent to $90.49. Chevron fell 2.3 percent to $97.93. Morgan Stanley dropped 3.4 percent to $13.18. Citigroup slipped 3.3 percent to $26.13.

Lowest Since 2003

RIM sank 6.9 percent to $10.46, the lowest level since 2003. An exodus of customers to Apple Inc.’s iPhone and Google Inc.’s Android devices has taken a toll on sales and profit, putting pressure on management to make changes. An operating loss would be the company’s first since 2004.
Sears Holdings Corp. (SHLD), the department-store chain controlled by hedge fund manager Edward Lampert, and Kohl’s Corp. (KSS) led declines in retail stocks ahead of tomorrow’s industrywide monthly sales report.
Sears, based in Hoffman Estates, Illinois, declined 8.2 percent to $52.76 for the largest drop in the S&P 500. Kohl’s slumped 3.2 percent to $49.03, while Macy’s Inc. (M) fell 1 percent to $38.58.
Twenty-seven of 32 companies in the S&P 500 Retailing Index (S5RETL) recorded declines today, including J.C. Penney Co. and Limited Brands Inc., owner of the Victoria’s Secret lingerie chain. The index decreased 1.3 percent.

Lower Forecast

The International Council of Shopping Centers, a trade group that tracks retailers, today cut its monthly U.S. same- store sales forecast to 2 percent from 3 percent, citing weakened consumer confidence leading to a slowdown in discretionary spending.
Facebook lost 0.1 percent to $28.81, after yesterday slipping below $30 for the first time. The recent slide in the stock that has cost investors $25 billion may (SPX) not end until the shares drop another 20 percent, leaving the company’s valuation on par with competitors that also do business over the Internet.
Facebook, with a market capitalization of $79.1 billion, is trading at 29.5 times the company’s projected 2014 profit of $2.69 billion, data compiled by Bloomberg show. The stock would have to dive to $23.07 to match the average price-to-earnings ratio for the Nasdaq Internet Index (QNET) based on estimated earnings in the next 12 months, according to the data.
Investors have pummeled the shares, citing concern over growth prospects for the largest social-networking service. Shareholders filed lawsuits that said the company and its underwriters overpriced Facebook at $38 a share. The IPO gave Facebook a higher multiple than 99 percent of the S&P 500.

‘Significant Premium’

“It could fall quite significantly because it was priced at a significant premium,” Sameet Sinha, an analyst at B. Riley & Co., said in a telephone interview yesterday. “Such stocks, when they go out of favor, tend to fall before stabilizing.”
Pep Boys -- Manny, Moe & Jack (PBY) plunged 22 percent to $8.63, the lowest level on a closing basis since August. The auto-parts chain slumped after ending its proposed $1 billion sale to Gores Group LLC, which questioned the deal earlier this month following lower-than-expected earnings.
Monsanto Co. (MON) rallied 2.2 percent to $76.41. The world’s largest seed company said third-quarter profit will exceed analysts’ estimates on rising sales in the U.S., Brazil and Eastern Europe. The company also boosted its full-year forecast.

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