U.S. Stocks Drop as Greece Concern Outweighs Obama’s Growth Plan
Wall Street
Justin Sullivan/Getty Images
A trader works on the trading floor at the New York Stock Exchange on September 9, 2011.
A trader works on the trading floor at the New York Stock Exchange on September 9, 2011. Photographer: Justin Sullivan/Getty Images
Sept. 9 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks fell, erasing a weekly gain for the Standard & Poor’s 500 Index, on speculation Greece could default on its debt and deepen an economic slowdown. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
Sept. 9 (Bloomberg) -- Stephen Wood, chief market strategist at Russell Investments, talks about the outlook for U.S. stocks. Wood also discusses consumer shares, Europe's sovereign debt crisis and his investment strategy. He speaks with Carol Massar, Matt Miller, Sheila Dharmarajan and Julie Hyman on Bloomberg Television's "Street Smart." (Source: Bloomberg)
U.S. stocks fell, driving the Standard & Poor’s 500 Index to the sixth drop in the past seven weeks, as concern Greece’s finances are deteriorating overshadowed President Barack Obama’s $447 billion plan to stimulate growth.
JPMorgan Chase & Co. (JPM) and Hewlett-Packard Co. decreased more than 6.9 percent on concern about a global financial crisis as 27 of 30 Dow Jones Industrial Average companies retreated. McDonald’s Corp. (MCD) slumped 4.6 percent as August sales trailed analysts’ estimates. Financial and materials companies in the S&P 500 fell 2.4 percent or more, the most among 10 industries. Yahoo! Inc. added 13 percent after the most-visited U.S. Web portal ousted Chief Executive Officer Carol Bartz.
The S&P 500 fell 1.7 percent to 1,154.23 this week, the second straight weekly loss and the lowest level since Aug. 22. The Dow retreated 248.13 points, or 2.2 percent, to 10,992.13.
“The market is very jittery,” Jason Hsu, who oversees $83 billion as chief investment officer at Research Affiliates LLC in Newport Beach, California, said in a telephone interview. “It’s hoping for good news, but it’s responding very quickly to anything that doesn’t indicate a path to recovery.”
The S&P 500 and Dow wiped out their weekly gains yesterday after three German officials said Chancellor Angela Merkel’s government is preparing plans to shore up banks if Greece defaults. The European Central Bank said Juergen Stark resigned from the executive board, suggesting policy makers are divided over how to fight the debt crisis. Stocks also fell after Obama called on Congress on Sept. 8 to pass a $447 billion plan to boost employment after jobs growth stalled last month.
Bear Market
Between April 29 and Aug. 8, the S&P 500 fell 18 percent amid concern about the European debt crisis and after S&P downgraded the U.S. government’s credit rating. The measure has risen 3.1 percent since then. It closed as low as 1,119.46 on Aug. 8, within 29 points of a bear market, or a 20 percent drop.
The European debt crisis may mimic the events that led to Lehman Brothers Holdings Inc.’s bankruptcy in September 2008, which spurred the biggest financial crisis since the 1930s, according to Eric Upin, chief investment officer at Makena Capital Management LLC.
“The problems in Europe are the same kind of problems we had in the U.S.,” Upin, who oversees $14.5 billion at the Menlo Park, California-based money manager, said on Sept. 8 at the Bloomberg Global Inflation Conference in New York. “The problems in Europe border on -- we don’t know the magnitude -- a solvency crisis, and there may not be the political system to solve those problems.”
‘Downside Risks’
European Central Bank President Jean-Claude Trichet said Sept. 8 that “downside risks” to the euro area intensified, giving officials the option to take further action to stimulate the economy should the debt crisis worsen. The ECB cut its growth forecasts for this year and next.
Stocks also fell as Federal Reserve Chairman Ben S. Bernanke disappointed investors by not detailing new plans to stimulate growth. He stopped short of signaling what he thinks is the Fed’s best option to aid the world’s largest economy when he spoke this week to economists in Minneapolis before an expanded two-day Fed meeting that ends Sept. 21.
“It seems like every move up is encountered with resistance and further selling,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc. in Boston, wrote in an e- mail. “Traders are hoping for a major announcement or policy from the Fed on Sept. 21. There is lots of concern that either Greece gets shown the gate in euro-land or Washington fails to pass anything of substance until 2014.”
Banks, Commodities
Financial companies lost the most in the S&P 500, decreasing 2.6 percent as a group. A gauge of raw-material producers fell the second-most, dropping 2.4 percent as the S&P GSCI index of 24 commodities lost 0.3 percent.
JPMorgan lost 7.4 percent, the most in the Dow, to $32.08. Bank of America Corp. (BAC) declined 3.7 percent to $6.98.
The Morgan Stanley Cyclical Index of companies most-tied to economic growth slipped 1.6 percent this week, while the Dow Jones Transportation Average of 20 stocks, also considered a proxy for the economy, slumped 1.7 percent.
General Electric Co. (GE), the world’s biggest maker of electricity-generating equipment, decreased 4.3 percent to $15.09. Alcoa Inc. (AA), the largest U.S. aluminum producer, retreated 3.8 percent to $11.58.
McDonald’s slumped 4.6 percent to $85.03. The world’s largest restaurant chain said sales at stores open at least 13 months rose 3.5 percent in August. Analysts projected a gain of 5 percent, the average of seven estimates compiled by Bloomberg. U.S. sales advanced 3.9 percent, missing analysts’ estimates for a 4.5 percent gain.
Pall, Whirlpool
Pall Corp. (PLL) fell the most in the S&P 500, losing 12 percent to $42.47. The producer of water-filtration and purification systems reported fiscal fourth-quarter earnings that missed analysts’ estimates as operating profit at its industrial division was $52 million, $18 million less than a year earlier.
Whirlpool Corp. (WHR) fell 10 percent, the second-biggest slump in the S&P 500, to $52.54. The world’s largest appliance maker was cut to “neutral” from “buy” at Goldman Sachs Group Inc., which cited a possible “sharp earnings deceleration from 2011 to 2013.”
Yahoo rose 13 percent to $14.48. Bartz said in a memo to staff on Sept. 6 that she was fired by Chairman Roy Bostock by telephone. The company said Chief Financial Officer Tim Morse will be interim CEO and announced a strategic review to boost growth. Under Bartz, who took over as CEO in January 2009, Yahoo failed to keep Google Inc. and Facebook Inc. from siphoning off Internet users and advertising revenue.
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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