U.S. Stocks Fall on Concern About Japan Quake’s Toll on Economy
March 14 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third time in four days, as investors struggled to assess how much damage Japan’s worst earthquake on record will do to the global economy. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
March 14 (Bloomberg) -- Charles Bobrinskoy, director of research at Ariel Investments, and Michael Palmer, a trader at Group One Trading, talk about the performance of U.S. stocks and the outlook for equities. They speak with Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
March 14 (Bloomberg) -- Jeffrey Palma, global equity strategist at UBS AG, discusses the potential impact of the Japan earthquake on the global economy and outlook for the equity market. Palma speaks with Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower for a third time in four days, as investors struggled to assess how much damage Japan’s worst earthquake on record will do to the global economy.
General Electric Co. (GE) slumped 2.2 percent as Japan worked to contain radiation at a damaged nuclear plant, compelling other nations to review atomic energy plans. Coach Inc. and Tiffany & Co. sank at least 5.2 percent on concern Japan sales will suffer. Las Vegas Sands Corp. (LVS), the casino company with most of its business in Asia, lost 3.6 percent as Jefferies & Co. cut its rating on the stock. MEMC Electronic Materials Inc. (WFR) surged 11 percent on bets demand for alternative energy will grow.
The S&P 500 slid 0.6 percent to 1,296.39 at 4 p.m. in New York, paring an earlier drop of as much as 1.4 percent as oil settled little changed at $101.19 a barrel. The Dow Jones Industrial Average sank 51.24 points, or 0.4 percent, to 11,993.16. The iShares MSCI Japan Index Fund (EWJ), a U.S. exchange- traded fund, tumbled 7 percent, the most since 2008.
“The market is pricing in a better understanding of the enormity and complexity of the natural disasters that struck Japan,” said Mohamed El-Erian, chief executive officer at Newport Beach, California-based Pacific Investment Management Co. “The immediate impact will be felt through lower global aggregate demand, disrupted supply chains, and funds flows into Japan.”
Retreat From 2011 High
U.S. stocks fell last week, sending the S&P 500 down 1.3 percent, after American and Chinese reports damped optimism about the global economy. The benchmark gauge of U.S. stocks is down 3.5 percent from its 32-month high in February, while still more than 90 percent above its bear-market low in 2009.
The selloff in Japan spread to Europe and the Americas as workers battled to contain radiation at a damaged nuclear plant north of Tokyo following a second blast. No large release of radiation was detected after the explosion, which didn’t breach the reactor and followed a build-up of hydrogen gas, Chief Cabinet Secretary Yukio Edano told reporters in Tokyo today. The risk of a large leak is very small, he said.
The Bank of Japan poured a record amount of cash into the financial system and doubled the size of its asset-purchase plan. The central bank pumped 15 trillion yen ($183 billion) into money markets today. Governor Masaaki Shirakawa and his board enlarged a program buying assets from government bonds to exchange-traded funds by 5 trillion yen, about one-tenth the size of the Federal Reserve’s quantitative easing.
‘Further Weakness’
“The Japanese earthquake has the potential to prompt further weakness in stock prices,” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $150 billion. “While you’ll see the Bank of Japan provide intense liquidity and economic activity increase due to rebuilding, there’s a lot of uncertainty. Still, if we have a 3 percent to 5 percent correction in stocks, we’d likely look at what’s attractively priced.”
General Electric declined 2.2 percent, the most in the Dow average, to $19.92.
The potential meltdown at a nuclear plant struck by Japan’s record temblor may be “a big dampener” on India’s program, Shreyans Kumar Jain, chairman of the Nuclear Power Corp. of India, said in Mumbai. The accident may become a factor in the drafting of China’s energy plans, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said in Beijing. Germany will suspend a planned extension of the lifespan of nuclear plants pending the outcome of an inquiry into their safety, Chancellor Angela Merkel said.
No Change
GE, which is in talks to sell reactors to India, won’t change its plans for the country after the Japan accident, Chief Executive Officer Jeffrey Immelt said today. Immelt expects the company’s Indian operations to grow 30 percent this year.
Uranium stocks slumped on concern demand will slow after the Japan accidents. U.S. shares of Canada’s Denison Mines Corp. (DML) plunged 22 percent to $2.55. Entergy Corp. (ETR) declined 4.9 percent to $70.09. The operator of nuclear power plants was cut to “market perform” from “outperform” by BMO Capital Markets.
Las Vegas Sands slid 3.6 percent to $38.62 after Jefferies cut its recommendation for the shares to “hold” from “buy.” The 12-month share-price estimate is $45.
Solar stocks rallied amid investors’ expectations that the companies may benefit as demand for alternative energy grows. MEMC Electronic Materials, the maker of wafers for the semiconductor and solar industries, advanced 11 percent to $13.37, the biggest gain in the S&P 500. First Solar Inc. (FSLR) increased 5.1 percent to $146.91.
Coal Companies
Consol Energy Inc. (CNX) gained 4.7 percent to $50.87. The coal and natural gas producer led other U.S. coal companies higher on expectations that the shutdown of Japanese nuclear reactors will lead to more coal use.
Lubrizol Corp. (LZ) soared 28 percent to $134.68. Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) agreed to buy the largest producer of lubricant additives for about $9 billion in the company’s second-biggest acquisition in the past five years.
Caterpillar Inc. (CAT) added 2.1 percent to $102.10 for the biggest gain in the Dow. The world’s largest construction equipment maker may be among the U.S. companies to benefit as Japan rebuilds after the world’s strongest earthquake since 2004 hit last week, according to analysts at Susquehanna Financial Group and Sterne Agee & Leach Inc.
Sale or Spinoff
Pfizer Inc. (PFE) rose 1.8 percent to $19.81. The world’s biggest drugmaker is reviewing the sale or spinoff of business units that may shrink the company’s revenue by almost half, said Tim Anderson, an analyst with Sanford C. Bernstein & Co. Pfizer would split off four non-pharmaceutical businesses as well as other units to reduce annual revenue to $35 billion to $40 billion from $67 billion, Anderson said in a research report today, citing a meeting with Chief Executive Officer Ian Read.
U.S. industrial production probably rose in February for a third month in the last four, indicating manufacturing remains a stalwart of the expansion, economists said before a report this week. Output at factories, mines and utilities climbed 0.6 percent after a 0.1 percent decrease in January, according to the median forecast in a Bloomberg News survey ahead of Federal Reserve figures on March 17. Other data may show less home construction and contained inflation excluding food and fuel.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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