U.S. Stocks Fall as Consumer Credit, Greece Spur Concern
By Whitney Kisling
April 7 (Bloomberg) -- U.S. stocks tumbled, with benchmark indexes slumping the most since February, as a bigger-than- estimated decrease in consumer credit and concern Greece may default fueled concern the economic rebound may slow.
Occidental Petroleum Corp. helped lead declines in 37 of 40 Standard & Poor’s 500 Index energy companies as oil slipped from the highest level since October 2008 on bigger-than-forecast growth in inventories. Visa Inc. and American Express Co. lost at least 1.7 percent after the Federal Reserve said consumer borrowing fell by $11.5 billion in February, indicating Americans are reluctant to take on more debt.
The S&P 500 lost 0.6 percent to 1,182.45 at 4:10 p.m. in New York, retreating from an 18-month high. The Dow Jones Industrial Average sank 72.47 points, or 0.7 percent, to 10,897.52. About three stocks fell for every two that rose on U.S. exchanges.
“There’s a lot of back-and-forth news, and we’re in a precarious position here,” said Jason Pride, director of investment strategy at Glenmede in Philadelphia, which manages $18 billion. “The market on the whole is feeling very uncertain about this environment.”
Equities extended declines after Federal Reserve Chairman Ben S. Bernanke, speaking in Dallas, omitted a reference to holding interest rates lower for an extended period. Stocks had briefly pared losses earlier after a $21 billion offering of 10- year Treasury notes, which influence rates on consumer and commercial loans. The notes drew a lower-than-estimated yield of 3.9 percent and a measure of demand was the strongest since 1994.
‘Extended Period’
Most U.S. stocks rose yesterday, led by banks, as investors bet that the Fed will keep its benchmark interest rate at a record low for an “extended period” to safeguard the economic recovery and lenders rallied on analyst upgrades.
Bernanke didn’t mention the plans to keep rates low in his speech today from Dallas. On the economy, he said joblessness, home foreclosures and weak lending to small businesses pose challenges to the world’s largest economy as it recovers.
“We are far from being out of the woods,” he said.
Stocks also fell as concern grew that Greece may default on its debt as it struggles to fund the European Union’s largest budget deficit.
The extra yield, or spread, between Greek 10-year bonds and benchmark German bunds widened to 405 basis points today, the most since the introduction of the euro in 1999.
‘Sovereign Concerns’
“There’s also still a lot of sovereign concerns out there,” said David Lutz, managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “Greece’s borrowing costs have jumped.”
More than three-quarters of stocks in the S&P 500 are “overbought” as of the April 5 close, according to Bespoke Investment Group LLC, which identified shares that are at least one standard deviation above their average price over the past 50 days. That reading is the highest since the bull market began in March 2009 and indicates equities may see “short-term losses,” Harrison, New York-based Bespoke said in a note to clients.
“We’re in a buying stampede, and it’s pretty rare to have them go much more beyond this,” said Jeffrey Saut, the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “Things are pretty overbought here on a short-term basis. I’m still pretty perky on stocks even though I’m cautious near-term.”
Oil Supply
S&P 500 energy shares lost 1 percent as a group, as crude oil fell 1.1 percent to below $86 a barrel. A government report today showed U.S. inventories climbed for a 10th week, the longest stretch of increases in five years. Occidental Petroleum retreated 2.5 percent to $86.30.
Massey Energy Co. slid the most in the S&P 500, losing 6.7 percent to extend its 11 percent decline from yesterday after an April 5 mine explosion killed 25 people in West Virginia. The mine is among sites where Massey, the largest coal producer in Central Appalachia, disputed U.S. findings of safety violations, records show. The U.S. Mine Safety and Health Administration has issued more than $900,000 in fines for the Upper Big Branch mine in the past year, according to federal data.
Visa, the world’s biggest payments network, slid 1.8 percent to $90.71 and credit-card issuer American Express Co. sank 1.7 percent to $42.37. The decline in the Fed’s measure of credit card debt and non-revolving loans was worse than the lowest estimate in a Bloomberg survey of 34 economists.
Rating Cut
Las Vegas Sands Corp., the casino operator expanding in Macau and Singapore, slid 2.1 percent to $22.93 after it was cut to “neutral” from “buy” at UBS. The shares, which have risen 57 percent in 2010 before today, would be more attractive at a lower price, UBS said.
AMB Property Corp. said first-quarter earnings, excluding some items, probably were 30 cents a share at most. That’s less than the average analyst estimate in a Bloomberg survey. The shares declined 3.9 percent to $27.53.
Netflix Inc. slumped 4.4 percent to $79.73 after Barclays Capital downgraded the shares to “equalweight” from “overweight.”
Advanced Micro Devices climbed 3.3 percent to $9.66 after UBS AG raised earnings estimates and moved the share-price target up to $13 from $12.
EOG Resources Inc., which produces natural gas and oil, climbed 6.5 percent to $103.74 after saying output will rise about 20 percent in both 2011 and 2012. The advance was the second-biggest in the S&P 500.
S&P 500 companies will post first-quarter profit growth of 30 percent, according to estimates compiled by Bloomberg. Alcoa Inc. will mark the unofficial start of the first-quarter earnings season when it reports results on April 12.
Two of the biggest retreats in the last 13 months have occurred during earnings seasons. The S&P 500 dropped 3.9 percent in the week ended Jan. 22 and 4 percent in the period to Oct. 30, data compiled by Bloomberg show. Investors who bought after those dips were rewarded with gains of more than 10 percent within two months, the data show.
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