U.S. Stocks Fall as Greece Swaps Surge to Record; Nike Retreats
By Rita Nazareth
June 24 (Bloomberg) -- U.S. stocks fell, with banks and retailers leading the Standard & Poor’s 500 Index to a fourth straight decline, as the surging cost to protect from a Greek default spurred concern the European debt crisis is worsening.
Bank of America Corp. and JPMorgan Chase & Co. dropped 2.3 percent or more, following declines in European lenders as credit-default swaps on Greek government bonds rose to a record and concern about U.S. financial regulation increased. Retailers slumped after Bed Bath & Beyond Inc., whose shares lost 3.9 percent, missed earnings estimates. Nike Inc. slid 3.9 percent as the athletic shoemaker’s sales trailed projections.
The S&P 500 lost 1.1 percent to 1,080.17 at 12:18 p.m. in New York, extending this week’s slump to 3.3 percent. The Dow Jones Industrial Average slipped 87.75 points, or 0.9 percent, to 10,210.69. The Stoxx Europe 600 Index declined 1.8 percent.
“It’s such a weak environment,” said Wasif Latif, vice president of equity investments at USAA Investment Management Co., which oversees $45 billion in San Antonio. “European issues seem to be far from over. There’s concern about financial regulation. Minus the government stimulus, data showed there’s not a whole lot going on in the economy. The drop in retailers indicates they got ahead of themselves. There’s de-risking.”
Stocks fell even after government reports showed unemployment claims fell from a two-month high and durable-goods orders excluding transportation equipment increased.
Three Years
The number of Americans applying for jobless benefits decreased by 19,000 to 457,000 in the week ended June 19, according to the Labor Department. Orders for goods meant to last at least three years, excluding autos and aircraft, rose in May for the third time in four months. The 0.9 percent increase followed a 0.8 percent decrease in April, figures from the Commerce Department showed.
“The economic figures this morning were encouraging given the disappointments we had with housing data,” said Hank Smith, who helps oversee $6 billion as chief investment officer of Haverford Trust Co. in Radnor, Pennsylvania. “Because of subpar growth, we’ll get mixed economic numbers. Whatever is happening in Europe and China is going to slow the growth rate.”
European stocks fell today, led by indexes in Greece, Spain and Portugal. Credit-default swaps on Greece rose 38 basis points to an all-time high of 970 basis points, according to CMA DataVision. Contracts on Portuguese government securities climbed 16 basis points to a two-week high of 336.5, while Spain rose 4 to 269.
Banks Slump
U.S. shares of Banco Santander SA, Spain’s biggest lender, dropped 3.3 percent to $10.93. JPMorgan declined 2.9 percent to $37.76.
Bank of America fell 2.3 percent to $15.07 after the largest U.S. lender by assets had its second-quarter profit estimate cut to 20 cents a share from 29 cents, excluding some items, at Collins Stewart Plc citing likely changes from financial reform legislation.
Trading of bearish options on U.S. banks and brokers jumped to 2.4 times the four-week average as U.S. lawmakers negotiated the final terms of the financial industry regulatory overhaul. Almost 440,000 puts to sell the Financial Select Sector SPDR exchange-traded fund changed hands as of 11 a.m. in New York, 22 times the number of calls giving the right to buy.
U.S. stocks fell yesterday after the Federal Reserve signaled that European indebtedness may harm the American economy and new-home sales sank to a record low. The S&P 500 still has gained 2.7 percent since June 7 and completed its biggest two-week rally since November on June 18 as concern about Europe’s debt crisis eased.
Moderate Recovery
“Concern about Europe will be there for awhile,” said Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which manages $9 billion. “There had been too much enthusiasm that the recession was over. It’s very noticeable that there has been a scale-back in expectations. The vigor of the recovery has moderated.”
An index of retailers in the S&P 500 slumped 2.4 percent, extending its decline from an almost three-year high in April to 18 percent.
Bed Bath & Beyond declined 3.9 percent to $39.83. The home- furnishings retailer forecast second-quarter earnings of no more than 63 cents a share. Analysts estimated earnings of 64 cents on average.
Nike lost 3.9 percent to $69.72. The largest maker of athletic shoes reported fourth-quarter revenue of $5.08 billion, missing the average analyst estimate of $5.15 billion in a Bloomberg survey.
Home Depot
Home Depot Inc. and Lowe’s Cos. fell at least 2.7 percent as analysts from Janney Montgomery Scott LLC downgraded shares of the two largest U.S. home-improvement retailers to “neutral” from “buy”, saying the housing market recovery remains slower than anticipated.
Pfizer Inc. dropped 2.2 percent to $14.55. The world’s biggest drugmaker said it suspended trials of its experimental pain relief drug, tanezumab, for osteoarthritis after reports that patients’ conditions worsened and led to joint replacements.
Western Digital Corp. fell 4.9 percent to $31.79. The world’s second-largest maker of hard disk drives and it bigger rival Seagate Technology are experiencing “excess channel inventory” as their rivals in Asia cut prices to gain market share, according to Rodman & Renshaw.
Discover Financial Services rose the most in the S&P 500, climbing 3.9 percent to $14.55. The credit-card issuer posted second-quarter profit that beat analysts’ estimates as write- offs declined more than forecast.
Hasbro
Hasbro Inc. rose 2.2 percent to $42.02 on takeover speculation. The world’s second-biggest toymaker denied reports that it’s in talks regarding a possible takeover, saying its board spurned an approach from a private-equity firm. The Wall Street Journal reported earlier that the toymaker was in discussions with Providence Equity Partners Inc. about a transaction.
The Standard & Poor’s 500 Index is near a level that, if broken, could lead the U.S. equity benchmark to a 14-month low, according to BTIG LLC.
Should the S&P 500 fall 3.8 percent from yesterday’s close, it would complete what analysts who study charts to make forecasts define as a “head-and-shoulders” pattern. That occurs after three successive rallies that an index can’t sustain. The middle peak -- the head -- marks the highest point. A drop below the “neckline” of 1,050, which passes through the lowest point of the pattern, could take the benchmark to 883, according to Michael O’Rourke, chief market strategist at BTIG.
“The pattern being formed is far from textbook,” said Yardley, Pennsylvania-based O’Rourke, whose firm serves institutional investors. “It lacks symmetry. For an ideal symmetry, the right shoulder should occur in late July, early August. This is not my base case, but instead investors should be on alert in case the pattern completes.”
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