By Rita Nazareth - Jul 23, 2012 10:56 PM GMT+0400
U.S. stocks declined, putting the Standard & Poor’s 500 Index on pace for its biggest slump in a month, on concern Europe’s debt crisis is deepening and as a Chinese central-bank adviser said growth may slow further.
U.S. stocks declined, putting the Standard & Poor’s 500 Index on pace for its biggest slump in a month, on concern Europe’s debt crisis is deepening and as a Chinese central-bank adviser said growth may slow further.
All 10 groups in the S&P 500 fell as commodity shares had the biggest losses. Alcoa Inc. (AA),Microsoft (MSFT) Corp. and Citigroup Inc. (C) dropped at least 2.1 percent, pacing declines among the largest companies. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. sank 2.1 percent. McDonald’s Corp. slid 2.4 percent as profit trailed estimates.
Stocks joined a global slump before the arrival in Athens tomorrow of Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund. Photographer: Richard Drew/AP Photo
July 23 (Bloomberg) -- Robert Sinche, global head of currency strategy at RBS Securities, talks about global market and euro-zone outlook. He speaks with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance." (Source: Bloomberg)
The S&P 500 retreated 1.1 percent to 1,347.49 at 2:54 p.m. New York time. The Dow Jones Industrial Average slipped 126.92 points, or 1 percent, to 12,695.65. The Chicago Board Options Exchange Volatility Index advanced 14 percent to 18.59. Trading in S&P 500 companies was up 7.5 percent from the 30-day average at this time of day. The euro weakened to the lowest in more than two years against the dollar, below its lifetime average.
“Investors are on edge,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.56 trillion. “Chinese growth has slowed. It’s not clear that the existing firewalls in Europe are large enough. We knew the Spanish regional governments had debt. The question is: how bad is it?”
Stocks fell as Spain’s 10-year bond yields rose to a euro- era high on bets more of its regions will ask for aid. Greece’s creditors meet this week, while German Vice Chancellor Philipp Roesler said he’s “very skeptical” European leaders will be able to rescue the nation. A Chinese central bank adviser said the country’s growth may cool to 7.4 percent this quarter.
Defensive Stance
Concern about a global slowdown and a deepening of Europe’s debt crisis has led investors to a more defensive stance since the S&P 500 (SPXL1)’s 2012 high in April. Phone, utility and consumer staples companies were the only ones to gain among the 10 groups during that period. Financial and technology shares have tumbled at least 9 percent for the biggest losses.
Companies which are most-dependent on economic growth had the biggest declines in the S&P 500 among 10 groups today. The Morgan Stanley (MS) Cyclical Index lost 1.4 percent. Alcoa, the largest U.S. aluminum producer, slid 2.1 percent to $8.09. Microsoft, the biggest software maker, dropped 2.9 percent to $29.25. Citigroup declined 2.2 percent to $25.31.
Investors also watched corporate results. Sales rose an average 3 percent in the second quarter among 123 members of the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Only 41 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.
Budget Conscious
McDonald’s slipped 2.4 percent to $89.37. Chief Executive Officer Don Thompson, who took the helm earlier this month, has struggled to lure budget-conscious Americans with a new extra- value menu. Sales at stores open at least 13 months in the U.S. rose 3.6 percent, the slowest growth in five quarters.
InterMune Inc. (ITMN), which makes the lung disease drug Esbriet, retreated 15 percent to $9.95 after reporting revenue that missed analysts’ estimates.
Facebook Inc. (FB) dropped 0.5 percent to $28.61. The largest social-networking service is getting its first crack as a public company this week to allay the growth concerns that have made it the second-worst performing U.S. technology initial public offering of 2012. Executives will hold a conference call July 26 to discuss second-quarter results.
Sales probably rose 30 percent to $1.16 billion in the June period, according to analystpredictions compiled by Bloomberg. That would be the slowest growth rate yet disclosed by the company co-founded by Mark Zuckerberg in 2004 in a Harvard University dorm room.
Apple’s Results
Apple Inc. (AAPL), the world’s largest company by market value, gained less than 0.1 percent to $604.44. Tomorrow, it will probably report profit grew 35 percent to $9.86 billion, according to the average of analysts’ estimates compiled by Bloomberg. Sales are projected to rise 31 percent to $37.3 billion. While that kind of growth would outpace gains by most of Apple’s technology peers, it would be the company’s slowest since 2009.
Halliburton Co. (HAL) rallied 2.7 percent to $31.59. The world’s largest provider of hydraulic-fracturing services said international sales climbed as the rig count and profit margin grew in the Eastern Hemisphere.
Eaton Corp. (ETN) rose 4.8 percent to $40.95. Its U.S. electrical equipment sales rose ahead of the company’s expansion in the industry through the acquisition of Cooper Industries Plc.
Chinese Deal
U.S. shares of Nexen Inc. (NXY) surged 53 percent to $26.02. Cnooc Ltd. agreed to pay $15.1 billion in cash to acquire Calgary-based Nexen in the biggest overseas acquisition by a Chinese company.
NRG Energy Inc. (NRG) jumped 7.4 percent, the most in the S&P 500, to $19.38. The company’s $1.7 billion agreement to buy GenOn Energy Inc. (GEN) would create the largest U.S. independent electricity generator with more market strength to withstand slumping power prices and capitalize on an eventual rebound. GenOn surged 27 percent to $2.31.
RailAmerica Inc. (RA) advanced 10 percent to $27.31, the highest since it went public in 2009. Genesee & Wyoming Inc. agreed to purchase it for $1.39 billion to combine North America’s two largest short-line and regional rail operators.
Peet’s Coffee & Tea Inc. (PEET) gained 28 percent to $73.30. Joh. A. Benckiser agreed to buy Peet’s, giving the closely held German holding company about 190 specialty cafes in the U.S. and access to an expanding grocery business.
Better-than-forecast earnings are masking weaker sales growth in the most recent quarter as U.S. companies improve margins to top estimates.
‘Frustratingly Slow’
The gap in results signals companies may hold off hiring and expanding until demand rebounds globally. Federal Reserve Chairman Ben S. Bernanke told lawmakers last week that progress in reducing unemployment may be “frustratingly slow” with joblessness stuck above 8 percent since February 2009.
Analysts have lowered predictions for profit and revenue in recent months. For earnings, they estimate a 1.6 percent decline on average among all S&P 500 members after anticipating a 0.5 percent increase in May. Revenue may rise 1.8 percent on average, down from a 3.7 percent estimate in May.
“People are sitting on the sidelines right now waiting to see what happens,” Verizon Communications Inc. Chief Financial Officer Fran Shammo said in a telephone interview last week after the New York-based company reported in-line second-quarter profit and sales. “This isn’t helping with growth, so I think we will continue to mosey along here in the states.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson atlthomasson@bloomberg.net
