U.S. Stocks Tumble on Mortgage Concerns, Apple Outlook
U.S. Stocks Decline on Apple’s Outlook
Ramin Talaie/Bloomberg
Traders work on the floor of the New York Stock Exchange in New York.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Ramin Talaie/Bloomberg
Oct. 19 (Bloomberg) -- Joseph McAlinden, fund manager at Catalpa Capital LLC, talks about the outlook for stock and commodity markets. McAlinden also discusses China's decision to raise interest rates, the U.S. dollar and his investment strategy. He talks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Oct. 19 (Bloomberg) -- Neil Dwane, chief investment officer for Europe at Allianz Global Investors' RCM unit, talks about his strategy for financial stocks and corporate bonds. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
U.S. stocks tumbled, dragging benchmark indexes to their biggest drop since August, amid concern banks will be forced to buy back soured mortgages and after Apple Inc. forecast profit that missed analyst estimates.
Bank of America Corp. slid 4.5 percent after people familiar with the matter said Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York seek to make it repurchase loans packaged into $47 billion of bonds. Apple retreated 2.7 percent. International Business Machines Corp. lost 3.4 percent following a decline in new contracts. Exxon Mobil Corp. led energy companies lower as oil slipped.
The S&P 500 Index lost 1.6 percent to 1,165.90 at 4 p.m. in New York, the biggest slide since Aug. 19. The Dow Jones Industrial Average fell 165.07 points, or 1.5 percent, to 10,978.62, while the Nasdaq-100 Index, of which Apple makes up 21 percent, dropped 1.6 percent to 2,069.73.
“Wall Street is measuring in real time lenders’ loan losses from the mortgage crisis,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus, which oversees $90 billion. “This additional overhang from the housing debacle is going to keep the financial stocks at bay for a long period of time.”
Stock futures extended losses after China’s central bank lifted one-year lending and deposit rates by 25 basis points. The increases come as the fastest-growing major economy seeks to prevent real-estate bubbles after record price gains this year.
Five-Month High
U.S. stocks rose yesterday, pushing the S&P 500 to a five- month high, after Citigroup Inc.’s earnings topped estimates and an unexpected drop in industrial production added to signs the Federal Reserve will boost government debt purchases to help fuel the recovery. Of the 47 companies in the S&P 500 that have posted results since Oct. 7, 39 have beaten analysts’ per-share earnings estimates, according to data compiled by Bloomberg.
Bank of America slid 4.4 percent to $11.80, erasing an earlier gain of 0.9 percent. A bondholder group wrote to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by the bank’s Countrywide Financial Corp. unit to service the loans properly, their lawyer had said yesterday in a statement that didn’t name the firms.
Apple dropped 2.7 percent to $309.49, breaking 10 straight days of gains, after the company said profit will be about $4.80 a share in the current period including the year-end holiday shopping season. Analysts surveyed by Bloomberg had predicted profit of $5.03.
Energy Stocks Drop
A measure of energy stocks fell the most among 10 industries in the S&P 500, losing 2.4 percent after crude oil tumbled the most in seven weeks. China’s rate increase may crimp demand in the world’s biggest consumer of energy. Exxon Mobil, the largest U.S. oil company, retreated 1.8 percent to $65.12.
An index of financial stocks in the S&P 500 slipped 1.4 percent. The gauge had increased 0.6 percent earlier as Goldman Sachs Group Inc. led a rally in bank stocks after reporting third-quarter profit that beat estimates.
Goldman Sachs gained 2 percent to $156.72. The U.S. bank that makes more money from trading than any of its competitors beat analysts’ estimates for third-quarter profit amid lower costs and higher investment-banking revenue. Net income in the three months ended Sept. 30 was $2.98 per share, compared with an average estimate of $2.29, according to a Bloomberg survey of 20 analysts.
IBM lost 3.4 percent to $138.03 as the biggest computer- services provider reported a 7 percent decline in services signings to $11 billion in the third quarter. IBM’s service business accounts for almost 60 percent of annual sales and more than 40 percent of profit.
The shares retreated even as IBM boosted its full-year profit forecast to at least $11.40 a share and reported earnings and sales for the period that exceeded analysts’ estimates.
Infinera’s Forecast
Infinera Corp. plunged 36 percent to $7.95. The maker of high-speed computer networking equipment forecast adjusted per- share earnings in the fourth quarter of 5 cents at most, falling short of estimates for 9 cents. The company also said Jagdeep Singh, its executive chairman, is resigning.
Stifel Nicolaus & Co. equity analyst Sanjiv Wadhwani cut Infinera to “hold” from “buy.”
Other makers of fiber-optic equipment fell, with JDS Uniphase Corp. retreating 6 percent to $11.40 and Oclaro Inc. tumbling 16 percent to $14.09.
Microsoft Corp., the world’s largest software company, slipped 2.8 percent to $25.10 after the company said Chief Software Architect Ray Ozzie, an executive once considered an heir to co-founder Bill Gates, will step down. The announcement marks the third resignation of a senior executive in less than five months.
VMware Tumbles
VMware Inc. tumbled 6.7 percent to $73.12. The biggest maker of programs that let computers run multiple operating systems reported third-quarter total deferred revenue of $1.51 billion, falling short of some estimates.
A system upgrade at NYSE Euronext’s electronic Arca stock market triggered what appeared to be a 9.6 percent plunge yesterday in an exchange-traded fund that tracks the S&P 500, a drop that would have erased $7.9 billion from one of the most popular securities in the U.S.
Data published by the electronic venue at 4:15 p.m. New York time showed the SPDR S&P 500 ETF Trust at $106.46, compared with its opening level of $117.74. The prices were later voided and the closing price updated to $118.54, up 0.7 percent, exchange officials said.
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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