U.S. Stocks Decline as Commodity Producers, Sears Shares Tumble
U.S. stocks retreated, sending the Standard & Poor’s 500 Index lower for a second straight day, as declines in oil and gold prices drove commodity producers down and Sears (SHLD) Holdings Corp. led a drop in retailers.
Freeport-McMoRan Copper & Gold Inc. (FCX) and ConocoPhillips (COP) paced losses in metal and energy companies, slumping at least 2.1 percent. Sears, the largest U.S. department-store chain, tumbled 9.9 percent after saying it lost money last quarter. Pfizer (PFE) Inc. slid 2.8 percent as sales of its Lipitor cholesterol pill, the world’s best-selling drug, missed estimates. MasterCard Inc. (MA), the second-biggest bank-card network, rallied 2.6 percent after earnings topped analysts’ estimates.
The S&P 500 (SPX) declined 0.3 percent to 1,356.62 at 4 p.m. in New York after falling as much as 0.9 percent at 4 p.m. The Dow Jones Industrial Average rose 0.15 point, or less than 0.1 percent, to 12,807.51. Both gauges fell yesterday after rising to the highest levels since 2008 amid higher-than-estimated corporate earnings and economic data.
“People are taking some chips off the table,” said Michael Strauss, who helps oversee $27 billion as chief investment strategist at Commonfund in Wilton, Connecticut. “We’ve had good numbers, but we also had a good run in the equity markets. In addition, there’s concern about the path of inflation and interest rates. Investors are treating things here more cautiously.”
Earnings Scorecard
The S&P 500 has risen 7.9 percent this year. Earnings-per- share beat estimates at 74 percent of the 336 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg.
The MSCI Emerging Markets Index dropped 1.7 percent today as India’s central bank raised interest rates by a more-than- estimated 0.5 percentage point after forecasting inflation will stay at an “elevated level.”
Stocks fell even after orders placed with U.S. factories rose 3 percent in March on increasing demand for machinery and computers, topping the median economist estimate in a Bloomberg News survey for a gain of 2 percent.
Sears Holdings declined 9.9 percent to $75.88, the worst drop in almost a year. The retailer said it lost $1.35 to $1.81 a share in the first quarter, compared with the 3-cent average profit estimate from analysts, as appliance sales dropped.
Gauges of energy and raw-material producers led declines in the S&P 500, falling 2.4 percent and 1 percent, respectively, as oil, silver and gold retreated. Silver futures tumbled, capping the biggest two-day slide since October 2008, after margin requirements on the Comex increased for the second time in less than a week. Gold fell the most since mid-March.
Freeport, Chesapeake
Freeport-McMoRan, the largest publicly traded copper producer, dropped 2.1 percent to $53.20. ConocoPhillips lost 3.8 percent to $74.53.
Chesapeake Energy Corp. (CHK) retreated 5.7 percent to $31.33. The most-active U.S. natural-gas driller reported a first- quarter loss, saying lost $725 million from energy hedging contracts used to lock in oil and gas prices.
Pfizer, the world’s biggest drugmaker, slumped 2.8 percent to $20.44. Lipitor had sales of $2.39 billion in the first quarter, missing the $2.55 billion average estimate of five analysts surveyed by Bloomberg. Sales will decline by more than half next year after generic-drug makers flood the U.S. market with cheaper copies, according to eight analysts surveyed.
Pfizer Chief Executive Officer Ian Read is selling units and cutting jobs to prepare for the loss of U.S. patent protection of Lipitor in November.
Four-Day Streak
The S&P 500 broke a four-day winning streak yesterday as declines in commodity producers led the market lower following an early rally spurred by the death of Osama bin Laden, leader of the al-Qaeda terrorist network.
“We’re seeing a defensive move today,” said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion. “There’s some fear about terrorist retaliation. Still, you just cannot knock this thing down too much. Profits have been fantastic and most economic reports tell us there is economic momentum.”
MasterCard gained 2.6 percent to $282.38. Profit excluding some items was $4.29 a share, beating the average analyst estimate of $4.09, as consumers stepped up spending.
MetroPCS Communications Inc. (PCS) rose 10 percent, the most in the S&P 500, to $18.15. The pay-as-you-go U.S. wireless provider reported first-quarter subscriber additions of 725,945. That beat the estimates of 475,000 from Jason Armstrong, an analyst with Goldman Sachs Group Inc., and 350,000 by Todd Rethemeier of Hudson Square Research.
Record Options Trading
Alcoa rallied 2.6 percent, the most in the Dow, to $17.67 and bullish options volume surged to a record amid speculation Rio Tinto Group will make a takeover offer for the largest U.S. aluminum producer. More than 360,000 calls to buy Alcoa shares changed hands, eight times the four-week average and the fourth- largest call volume on U.S. exchanges, according to data compiled by Bloomberg.
Mark Kelly, an analyst at Olivetree Securities in London, said he was skeptical about “unsubstantiated” speculation today that Rio has secured a syndicated loan it may use to make a bid for Alcoa for $25.50 a share. Rio has “generally been happy” to focus on smaller purchases, such as Australian coal miner Riversdale Mining Ltd., Kelly said today in a report.
Tony Shaffer, a spokesman for Rio, and Alcoa’s Michael Belwood said separately that their companies don’t comment on market speculation.
The debate over U.S. borrowing limits may drive equity markets down as much as 7 percent in July, according to Tobias Levkovich of Citigroup Inc.
No Catastrophe
The U.S. government is approaching the $14.29 trillion limit that it’s allowed to borrow. A growing number of Republican lawmakers such as Senators Pat Toomey and Jim DeMint and Representative Joe Walsh are rejecting warnings that failing to raise the debt limit would trigger a financial catastrophe.
“I’m concerned that the debt-ceiling debate can get somewhat rancorous and nasty as the Republicans really want to push for something important in terms of spending cuts,” Levkovich, the chief U.S. equity strategist at the New York- based firm, said in an interview today on Bloomberg Television’s “InBusiness” with Margaret Brennan. “Markets could get very unsettled already in July.”
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Jeff Sutherland in New York at jsutherlan13@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
May 3 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks retreated, sending the Standard & Poor’s 500 Index lower for a second straight day, as declines in oil and gold prices drove commodity producers down and Sears Holdings Corp. led a drop in retailers. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
May 3 (Bloomberg) -- Doug Cliggott, U.S. equity strategist at Credit Suisse, talks about the outlook for Federal Reserve policy and its likely impact on financial markets. Cliggott speaks with Carol Massar, Matt Miller and Julie Hyman on Bloomberg Television's "Street Smart." (Source: Bloomberg)
May 3 (Bloomberg) -- Michael Price, president of MFP Investors LLC, talks about the state of the financial markets and factors driving corporate mergers and acquisitions, his investment strategy and some of his holdings, and concerns about food inflation. Price speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 3 (Bloomberg) -- Dan Miller, head of institutional equities at Gabelli & Co., discusses the firm's latest "Focus Five" stock recommendations. Miller speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
May 3 (Bloomberg) -- Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc., discusses the outlook for the U.S. economy and financial markets following the death of Osama Bin Laden. Levkovich, speaking with Margaret Brennan on Bloomberg Television's "InBusiness," also discusses the the U.S. debt ceiling and Federal Reserve Monetary Policy. (Source: Bloomberg)
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