U.S. Stocks Reverse Gain in Final Hour on Greece Woes

U.S. stocks erased gains in the final hour of trading as concern that Greece would exit the euro and a tumble in Facebook (FB) Inc. shares overshadowed economic optimism.

Commodity and technology shares in the Standard & Poor’s 500 Index fell, while financial companies gained. Facebook slumped 8.9 percent, dropping 19 percent in two days. A gauge of homebuilders in S&P indexes rose 1.9 percent amid a better-than- estimated housing report. Best Buy Co. (BBY) rallied 1.6 percent after reporting first-quarter profit that exceeded estimates. Dell Inc. tumbled 12 percent at 5:43 p.m. New York time after forecasting revenue that missed analysts’ projections. S&P 500 June futures dropped 0.6 percent as of 2:50 p.m. in Tokyo.

About three stocks fell for each rising on U.S. exchanges at 4 p.m. New York time. The S&P 500 added 0.1 percent to 1,316.63, almost erasing a gain of 1 percent. The Dow Jones Industrial Average lost 1.67 points, or less than 0.1 percent, to 12,502.81. About 7.3 billion shares changed hands on U.S. exchanges, or 8.2 percent above the three-month average.

“Stocks did a 180,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “On a relative basis, the U.S. is the cleanest dirty shirt. Yet Europe is still a dominant story for the market.”

Stocks erased gains after Dow Jones reported that former Greek Prime Minister Lucas Papademos said while it is unlikely the nation will leave the euro, it’s still a risk. European Union leaders are planning to gather in Brussels tomorrow to discuss how to revive growth. Equities rallied earlier today as sales of existing U.S. homes rose in April while investors speculated China and Europe will stimulate growth.

Europe Concern

Concern about Europe’s debt crisis drove the S&P 500 down as much as 8.7 percent from an almost four-year high in April. Still, the benchmark gauge was up 4.7 percent in 2012 amid better-than-estimated economic and corporate reports. About 70 percent of S&P 500 companies that reported first-quarter results beat analysts’ estimates, data compiled by Bloomberg show.

“We went from risk-on to risk off pretty quickly,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “Greece is not a major economy, but there’s obviously fear of contagion in case it exits the euro. These outside factors will weigh on the market even as economic numbers are good.”

Measures of commodity shares in the S&P 500 had the biggest losses among 10 groups. Crude oil slipped as Iran agreed to let Western nuclear inspectors into the country, easing concern that the conflict over its atomic energy program would disrupt Mideast supplies. Gold and copper also retreated.

Coal Producers

Patriot Coal Corp. (PCX) slumped a record 35 percent to $2.18. The U.S. miner that last week warned of a possible customer default hired Blackstone Group LP and said it’s still working with lenders to finalize $625 million of loan and credit facilities. Peabody Energy Corp. (BTU) lost 3.9 percent to $23.65. Alpha Natural Resources Inc. (ANR) retreated 3.9 percent to $11.21.

Technology shares, which comprise 20 percent of the S&P 500, also retreated. Apple Inc. (AAPL), the world’s most valuable company lost 0.8 percent to $556.97. The shares rose as much as 2.2 percent earlier today.

Facebook, the social networking site that raised $16 billion in an initial public offering last week, plunged 8.9 percent to $31. The offering valued Facebook at 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. The slump reinforces concern that the IPO was priced too high.

Too High

Sentiment toward the offering worsened yesterday after Facebook fell below the $38 price set by underwriters, burning investors who speculated the company would mimic IPOs such as LinkedIn Corp. (LNKD), which doubled on its first day. While bulls forecast benefits as companies shift advertising to the Internet, Brian Wieser of Pivotal Research Group LLC, said Facebook’s price is too high and the path to growth unclear.

“There’s always a risk of buying into excessive hype, using rules of thumb for valuation that are divorced from fundamentals,” Wieser, a New York-based analyst at Pivotal, said in a telephone interview yesterday. “There are many things that really speak to the uncertainty investors should be incorporating when they’re thinking about Facebook.”

Dell slumped 12 percent to $13.30 after the close of regular trading. The world’s third-largest personal computer maker lost share in the global PC market in the first three months of the year, according to market researcher Gartner Inc. Dell (DELL) has eschewed sales of less profitable PCs to boost its profit margin, which is causing revenue to slump, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. in San Francisco.

Homebuilders, Banks

Homebuilders rallied as PulteGroup Inc. (PHM) advanced 2.5 percent to $9.08, while Lennar Corp. (LEN) increased 2.2 percent to $27.61. A measure of diversified financial shares had the biggest advance among 24 groups in the S&P 500, gaining 1.4 percent. The KBW Bank Index (BKX) rose 1.1 percent as 22 of its 24 stocks advanced.

JPMorgan Chase & Co. (JPM) jumped 4.6 percent to $34.01, rebounding from a 20 percent plunge following its May 10 disclosure of at least $2 billion in trading losses. Goldman Sachs Group Inc. reiterated its buy rating on the stock today, saying the company’s plan to halt share buybacks reflects a “prudent decision” to preserve capital given the volatility and uncertainty around its chief investment office’s holdings.

Best Buy added 1.6 percent to $18.46. The largest U.S. consumer-electronics retailer lured customers with discounts on smartphones, part of former Chief Executive Officer Brian Dunn’s efforts to compete with Amazon.com Inc. Lower demand for televisions and notebook computers reduced comparable-store sales in the quarter by 5.3 percent.

Urban Outfitters

Urban Outfitters Inc. (URBN) climbed 7.4 percent, the biggest gain in the S&P 500, to $28.10. The retailer that rehired co-founder Richard Hayne as chief executive officer this year reported first-quarter profit that beat analysts’ estimates on record sales.

Ralph Lauren Corp. (RL) added 2.7 percent to $150.27. The retailer of its namesake brand clothing reported profit that beat analysts’ estimates because of sales gains at its own shops and department stores.

Ariba Inc. (ARBA) surged 19 percent to $44.87, the highest level since 2002. SAP AG, the largest business-management software maker, agreed to buy the online-trading platform for businesses for $4.3 billion in the German company’s biggest push into cloud computing.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Michael P. Regan at mregan12@bloomberg.net

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