Stocks Slump on Concern Economic Recovery Slowing; Euro Weakens on Greece
U.S. Stocks Fall on Slow Recovery, Greec
Jin Lee/Bloomberg
Commodity producers, financial firms and technology companies led declines of at least 1.2 percent in all 10 of the main industry groups in the S&P 500.
Commodity producers, financial firms and technology companies led declines of at least 1.2 percent in all 10 of the main industry groups in the S&P 500. Photographer: Jin Lee/Bloomberg
June 15 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market. U.S. stocks fell, threatening the 2011 gain for the Standard & Poor’s 500 Index, on concern Greece will default and signs the American economy is cooling down. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
June 15 (Bloomberg) -- Liam Dalton, president and chief executive officer of Axiom Capital Management Inc., talks about his investment strategy for U.S. stocks. Dalton also discusses the outlook for equities, the U.S. economy and Federal Reserve monetary policy. He speaks with Matt Miller, Carol Massar, Julie Hyman and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)
June 15 (Bloomberg) -- Carter Worth, chief market technician at Oppenheimer & Co., talks about the performance of the S&P 500 index, investment strategy and his preference for gold, Yum! Brands Inc., ConocoPhillips and Baidu Inc. Worth speaks with Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
June 15 (Bloomberg) -- Ari Bergmann, managing principal at Penso Advisors LLC, talks about investment strategy and the management of risk from the European sovereign debt crisis, stagflation in the U.S. and potential economic overheating in China. Bergmann speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)
June 15 (Bloomberg) -- Jeff Applegate, chief investment officer at Morgan Stanley Smith Barney, talks about his investment strategy, U.S. and European financial stocks, the sovereign debt crisis in Greece and U.S. fiscal policy. He talks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
June 15 (Bloomberg) -- John Herrmann, a senior fixed-income strategist at State Street Global Markets, talks about the outlook for the U.S. economy and inflation. Herrmann speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
June 15 (Bloomberg) -- Jim Conklin, head of investment research at FX Concepts LLC, talks about the European debt crisis and the impact on the euro. He also discusses the outlook for the dollar and emerging market currencies. Conklin speaks with Bloomberg’s Paul Dobson at a conference in London. (Source: Bloomberg)
June 15 (Bloomberg) -- John Ryding, chief economist at RDQ Economics LLC, talks about Federal Reserve monetary policy and prospects for adoption of an explicit inflation target by the central bank. Ryding, speaking with Betty Liu, Dominic Chu and Michael McKee on Bloomberg Television's "In the Loop," also discusses the U.S. consumer-price index for May and the impact of monetary policy on commodity prices. (Source: Bloomberg)
June 15 (Bloomberg) -- Don Brownstein, chief executive officer of Structured Portfolio Management LLC, discusses the U.S. housing market and outlook for the economy. Brownstein speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
June 15 (Bloomberg) -- Andrew Bosomworth, fund manager at Pacific Investment Management Co., discusses the battle between Germany and the European Central Bank over Greece's debt crisis. Bosomworth speaks from Munich with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
June 15 (Bloomberg) -- Nicholas Colas, chief market strategist at BNY ConvergEx Group LLC, talks about the outlook for the equity market and investor sentiment. Colas speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
June 15 (Bloomberg) -- The cost of living in the U.S. rose more than forecast in May reflecting higher prices for everything from autos to hotel rooms. The consumer-price index increased 0.2 percent, figures from the Labor Department showed today. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.3 percent. Separately, the Federal Reserve Bank of New York’s general economic index dropped to minus 7.8 in June, the lowest level since November, from 11.9 last month. Bloomberg's Michael McKee and Betty Liu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
June 15 (Bloomberg) -- Russell Jones, global head of fixed-income strategy at Westpac Banking Corp., talks about a proposal to ease Greece's debt crisis based on the so-called Vienna initiative. He speaks from Sydney with Linzie Janis on Bloomberg Television's "Global Connection." (Source: Bloomberg)
June 15 (Bloomberg) -- Alastair Newton, an analyst at Nomura Holdings Inc., talks about Greece's debt problems. Newton also discusses the challenges facing Indonesia's economy and the outlook for global financial markets. He speaks from Singapore with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
U.S. Stocks Retreat
Jin Lee/Bloomberg
U.S. stocks retreated, snapping a two-day gain, on rising concern about a Greek bailout and growing signs that the American economy is slowing.
U.S. stocks retreated, snapping a two-day gain, on rising concern about a Greek bailout and growing signs that the American economy is slowing. Photographer: Jin Lee/Bloomberg
Euro Falls Amid Concerns Over EU Deadlock on Greek Plan
Hannelore Foerster/Bloomberg
A visitor walks past the European Central Bank logo, featuring a euro symbol, in Frankfurt, Germany.
A visitor walks past the European Central Bank logo, featuring a euro symbol, in Frankfurt, Germany. Photographer: Hannelore Foerster/Bloomberg
U.S. stocks sank the most in two weeks, almost erasing the 2011 gain for the Standard & Poor’s 500 Index, and the euro slid the most in more than a month amid rising concern that Greece will default and evidence that the American economy is slowing. Treasuries rallied.
The S&P 500 fell 1.7 percent to a three-month low of 1,265.42 at 4 p.m. in New York, trimming its year-to-date gain to 0.6 percent, and the Stoxx Europe 600 Index closed down 1.1 percent. The euro lost 1.9 percent to $1.4166 and the cost of insuring Greek and Portuguese debt climbed to records. Oil sank to the lowest price since February as the S&P GSCI Index of commodities plunged 3.4 percent. The Dollar Index surged the most in 10 months, 10-year Treasury yields fell below 3 percent and two-year rates dropped the most since April.
Stocks and the euro extended losses amid concern Greek Prime Minister George Papandreou will be forced out of office amid escalating protests over budget cuts, fueling speculation that the austerity measures needed to qualify for international aid will be put in jeopardy. A report that Ireland’s finance minister wants bondholders to share the burden of bailing out the nation’s banks also weighed on markets. The S&P 500 erased a two-day gain as economic reports spurred concern growth is slowing as inflation picks up.
“The euro is getting killed because the risk trade is off as people run to the dollar and Treasuries,” said Donald Selkin, New York-based chief market strategist at National Securities Corp., which manages $3 billion. “It’s going to be a tough summer. We’re seeing slowing economic growth and a little higher inflation, that’s not a good combination.”
Broad Retreat
Commodity producers, financial firms and technology companies led declines of at least 1.2 percent in all 10 of the main industry groups in the S&P 500. Alcoa Inc., Bank of America Corp. and Home Depot Inc. lost more than 2.4 percent to lead declines in all 30 stocks in the Dow Jones Industrial Average, which sank 178.84 points, or 1.5 percent, to 11,897.27.
The Federal Reserve Bank of New York’s manufacturing index dropped to minus 7.8, the lowest level since November. The gauge was forecast to read 12, according to a Bloomberg survey of economists. Readings less than zero signal contraction in the so-called Empire State Index that tracks the New York region. Separate data showed industrial production rose 0.1 percent. Economists projected a 0.2 percent gain. Another report showed homebuilder confidence trailed estimates.
Inflation Accelerates
The consumer-price index increased 0.2 percent, compared with the 0.1 percent median forecast of economists in a survey, figures from the Labor Department showed. The so-called core measure, which excludes more volatile food and energy costs, climbed 0.3 percent, the biggest increase since July 2008.
Owens-Illinois Inc. (OI), the world’s largest maker of glass bottles, sank 14 percent for the biggest drop in the S&P 500 and the stock’s worst slide in more than two years after the company lowered its forecast for second-quarter profit margin because of higher costs and weaker demand in Australia, where it may idle a glass furnace. Scotts Miracle-Gro Co. (SMG) declined 6 percent as the maker of lawn-care products cut its earnings forecast for 2011.
Pandora Media Inc., the online-radio company, surged 8.9 percent to $17.42 in its stock-market debut in New York after its shares priced at $16 each, above the top of range.
‘Still Pretty Optimistic’
The S&P 500 has tumbled 7.2 percent from an almost three- year high at the end of April as data on manufacturing, employment growth and housing trailed economists’ estimates and investors prepared for the end of the Fed’s $600 billion bond- purchase program known as quantitative easing.
The weakening economic reports triggered concern that analysts are too optimistic as they project 20 percent earnings growth in 2011 on a 9.7 percent increase in revenue, according to estimates compiled by Bloomberg. The S&P 500 is trading at 12.7 times forecast 2011 earnings, the lowest multiple in almost a year.
“Analysts who cover the major companies or the major indices are still pretty optimistic about revenue growth and earnings growth,” Nicholas Colas, chief market strategist at BNY ConvergEx Group LLC, told Bloomberg Television. “They haven’t seen and heard about the kind of slowdown the market is worried about. So if companies can come through with solid earnings, which they have for the last two years, and show some positive revenue growth, then I think we have a better more balanced recipe for an expansion in the market”
Two-year Treasury note yields dropped six basis points, or 0.06 percent, to 0.38 percent. The Dollar Index rose 1.7 percent to 75.593, the most since August on a closing basis, after falling for two days.
Default Swaps Climb
The cost of protecting corporate bonds from default in the U.S. jumped. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 3.3 basis points to a mid-price of 100.04, erasing yesterday’s 2.8 basis point decrease, according to index administrator Markit Group Ltd.
Oil tumbled below $95 a barrel for the first time since February on concern fuel consumption will decrease as the economy slows. Crude for July delivery sank 4.6 percent to $94.81.
Of the 24 commodities tracked by the S&P GSCI Index, only five gained -- silver, gold, lean hogs, soybeans and natural gas. Gold futures increased 0.1 percent to $1,526.20 an ounce.
European Shares
Almost nine stocks fell for each that gained in the Stoxx 600, with banks leading losses. National Bank of Greece SA slid 6 percent and Banco Comercial Portugues SA (BCP) sank 6.1 percent. BNP Paribas SA, Societe Generale SA and Credit Agricole SA may have their debt ratings cut because of their investments in Greece, Moody’s Investors Service said today. Shares of each bank slipped more than 2.4 percent.
Greece’s Papandreou will name a new government tomorrow and call a vote of confidence in parliament as he seeks to pressure rebel lawmakers to back the austerity plan that aims to secure a new bailout. Papandreou’s plan comes amid mounting opposition and defections among allies and counters a demand by the New Democracy opposition party that he quit and that a cross-party coalition renegotiate the terms of the rescue.
An emergency session of European finance ministers ended with no progress on a new aid package for Greece, German Finance Minister Wolfgang Schaeuble told reporters yesterday. EU finance ministers meeting in Brussels yesterday agreed to convene again on June 19, a day earlier than planned. Talks may drag on into July, Luxembourg’s Finance Minister Luc Frieden said.
Dollar Rallies
The yield on the Greek 10-year bond climbed as much as 58 basis points to a record 17.96 percent, rising for the seventh day, as protesters in Athens threatened to surround Parliament, where lawmakers began to debate budget cuts and asset sales. The extra yield investors demand to hold the securities instead of benchmark German bunds rose to a record 1,498 basis points during the day.
Ireland’s 10-year bond yield increased 17 basis points to 11.56 percent, the highest since at least 1991, and the nation’s benchmark ISEQ Index of stocks sank 1.1 percent.
Irish Finance Minister Michael Noonan said senior unsecured, unguaranteed bondholders in Anglo Irish Bank Corp. and Irish Nationwide Building Society should share the burden of bailing out both lenders, according to Dublin-based broadcaster RTE. In an interview, Noonan said he discussed the issue with the International Monetary Fund and that the Washington-based organization supported the strategy, according to RTE.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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