U.S. Stocks Drop as Euro, Greek Bonds Slide; Gap Shares Tumble
European Stocks Climb
Chris Ratcliffe/Bloomberg
A stockbroker studies share prices on his computer screens in London.
A stockbroker studies share prices on his computer screens in London. Photographer: Chris Ratcliffe/Bloomberg
May 20 (Bloomberg) -- Bloomberg's Cali Carlin reports on the performance of the U.S. equity market today. U.S. stocks slumped, capping the longest weekly losing streak since August for the Standard & Poor’s 500 Index, amid concern Greece will default on its debt and as Gap Inc.’s profit forecast missed estimates. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
May 20 (Bloomberg) -- Louis Navellier, chief investment officer at Navellier & Associates Inc., talks about his investment strategy and some of his stock picks. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
May 20 (Bloomberg) -- Bankim "Binky" Chadha, chief U.S. equity strategist at Deutsche Bank AG, talks about the outlook for U.S. stocks and corporate earnings. Chada also discusses commodity prices, LinkedIn Corp.'s initial public offering and his investment strategy. He speaks with Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
May 20 (Bloomberg) -- Gabriel de Kock, an executive director at Morgan Stanley, talks about Greece's credit rating and the prospects of the country defaulting on its debt. Fitch Ratings cut Greece's rating to B+, four levels below investment grade, from BB+. De Kock speaks with Pimm Fox on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 20 (Bloomberg) -- Adrienne Tennant, analyst at Janney Montgomery Scott LLC, talks about the outlook for Gap Inc. She speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
May 20 (Bloomberg) -- Richard Jaffe, an analyst at Stifel Nicolaus & Co., talks about the outlook for Gap Inc. and the company's shares. The largest U.S. apparel chain dropped the most in almost nine years after cutting its full-year profit forecast by 22 percent as costs to make cloth rose faster than expected. Jaffe speaks with Julie Hyman on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
Asian Stocks Gain, Yen Weakens on BOJ Outlook
Tomohiro Ohsumi/Bloomberg
Tokyo Electric Power Co. may report a record 1.5 trillion yen ($18 billion) loss today and replace President Masataka Shimizu, 10 weeks after an earthquake and tsunami crippled its Fukushima Dai-Ichi nuclear plant, the Yomiuri newspaper reported.
Tokyo Electric Power Co. may report a record 1.5 trillion yen ($18 billion) loss today and replace President Masataka Shimizu, 10 weeks after an earthquake and tsunami crippled its Fukushima Dai-Ichi nuclear plant, the Yomiuri newspaper reported. Photographer: Tomohiro Ohsumi/Bloomberg
U.S. stocks fell, capping a third straight weekly decline for the Standard & Poor’s 500 Index, after Gap Inc. (GPS) cut its earnings forecast and concern grew that Greece will default. The euro sank, halting a four-day gain versus the dollar, and Greek bonds tumbled.
The S&P 500 lost 0.8 percent to 1,333.27 at 4 p.m. in New York and slipped 0.3 percent in the week. Ten-year Treasury yields decreased three basis points to 3.15 percent. The euro sank against all 16 major peers, tumbling 1.1 percent versus the dollar. Greek 10-year bond yield added 57 basis points, driving the difference with German bunds to a record 1,352 basis points. Oil reversed earlier declines after the American Petroleum Institute reported that fuel consumption increased in April.
Gap, the largest U.S. apparel chain, sank 17 percent for its worst slide in nine years after slashing its full-year earnings forecast because of higher costs. Stocks and the euro extended losses as Fitch Ratings downgraded Greece’s debt and said any potential extension of bond maturities would be considered a default.
“People are moving away from risk-related trades,” said Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Inc., which oversees $3.6 billion. “There’s a perception that there won’t be a quick fix for Europe. Anyway you want to cut it, people will see a de facto default. In the U.S., both consumers and companies have been hit by higher energy costs. You’re going to see that in the bottom-line of companies such as Gap and others.”
Advance Halted
The S&P 500 halted a two-day advance and erased what would have been its first weekly gain of the month. Alcoa Inc., JPMorgan Chase & Co. and General Electric Co. lost at least 1.6 percent to lead declines in 28 of 30 stocks in the Dow Jones Industrial Average. Barnes & Noble Inc. (BKS) surged 30 percent as the bookstore chain received a takeover offer from John Malone’s Liberty Media Corp.
The S&P 500 has fallen about 2.2 percent from an almost three-year high at the end of last month as investors prepare for the Federal Reserve’s exit from record stimulus efforts and as economic data trails forecasts. Citigroup Inc.’s U.S. Economic Surprise Index, which gauges the rate at which data is exceeding or trailing estimates and reached a record in March, turned negative in May and is at its lowest level since August.
Fed Bank of Chicago President Charles Evans said yesterday “slow progress” in the economy justifies stimulus measures, while his New York counterpart, William C. Dudley, said it’s important not to “overreact” to inflation.
Euro Slumps
The euro weakened 1.1 percent to $1.4158 and dropped 1 percent versus the yen and 1.2 percent versus the Swiss franc. The Dollar Index, which tracks the currency against six major peers, rose 0.7 percent, trimming its weekly decline to 0.2 percent.
The S&P GSCI Index of 24 raw materials slumped as much as 1.7 percent to below its lowest closing level in three months, before the rebound in oil helped pull the gauge up 0.8 percent.
Crude oil for June delivery rose 1.1 percent to $99.49 a barrel. Oil erased earlier losses as API reported total deliveries of petroleum products, a measure of demand, climbed 5.2 percent last month from a year before. Heating oil, a distillate fuel like diesel and jet fuel, jumped more than 1 percent.
Copper gained 1.7 percent to $4.1215 a pound in New York amid declining stockpiles in China and the U.S., the world’s biggest buyers of the metal. The price rose 3.5 percent this week, the most n a month.
The yield on Greek 10-year bonds surged to 16.57 percent this week, while the nation’s two-year debt yield increased 61 basis points to 25.47 percent.
Greece Ratings
Fitch Ratings cut Greece three levels to B+, four steps below investment grade, from BB+. Fitch said even a “soft” restructuring of debt being studied by European Union policy makers would be considered a default. Fitch said Greece could face a further reduction in its creditworthiness. The yield on Greek 10-year bonds is more than twice the level of a year ago when Greece accepted an EU-led bailout.
The Portuguese 10-year yield increased 27 basis points to 9.39 percent, sending the spread with benchmark German bunds 33 basis points wider. Irish 10-year bond yields rose nine basis points to 10.54 percent, with similar-maturity Spanish yields nine basis points higher at 5.48 percent.
The Stoxx Europe 600 Index slipped 0.1 percent, erasing earlier gains. Spanish lenders Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA fell before elections in the country this weekend. Italy’s Intesa Sanpaolo SpA and UniCredit SpA also paced losses among banks.
BP Gains
BP Plc (BP/) rallied 2.7 percent after saying it will receive $1.065 billion in a settlement with a unit of Mitsui & Co. over last year’s Gulf of Mexico spill. Micro Focus International Plc (MCRO) rose 7.8 percent after the Financial Times said Advent International Corp. approached the company about a takeover.
The MSCI Emerging Markets Index climbed 0.1 percent, rebounding from earlier losses with the price of oil. India’s Bombay Stock Exchange Sensitive Index jumped 1 percent after Tata Power Co., the country’s largest non-state electricity utility, posted profit that beat analysts’ estimates. Russia’s Micex Index fell for the first time in three days, losing 1.6 percent.
To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; 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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