U.S. Stocks Fall Most Since November on Italian Elections

Feb. 25 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Dominic Chu report on today’s ten most important stocks including Hertz, Macy's and Ceasars Entertainment. (Source: Bloomberg)

U.S. stocks fell, giving benchmark indexes their biggest losses since November, as partial election results spurred concern about prospects for a stable government in Italy and a worsening of Europe’s debt crisis.

Lowe’s Cos. tumbled after forecasting profit this year that trailed analysts’ estimates amid sales to clear slower-moving merchandise. Chesapeake Energy Corp. (CHK) slumped 6.8 percent after agreeing to sell a stake in an Oklahoma oilfield to China Petrochemical Corp. for less than one-third of its estimated value. ITT Educational Services Inc. tumbled 17 percent after disclosing that U.S. regulators subpoenaed documents related to private loan programs for its students.

The Standard & Poor’s 500 Index retreated 1.8 percent to 1,487.85 at 4 p.m. New York time. The benchmark measure advanced as much as 0.7 percent earlier today. The Dow Jones Industrial Average decreased 216.40 points, or 1.6 percent, to 13,784.17. About 7.4 billion shares changed hands on U.S. exchanges today, or 18 percent above the three-month average.

“We don’t want to see more chaos out of Europe,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. His firm oversees more than $20 billion. “Any question about whether or not Italy would be committed to austerity measures after the elections gets investors concerned.”

Stocks erased gains on concern Italy may be left with a hung parliament as partial election results suggested Silvio Berlusconi may have built a blocking minority in the Senate to deny victory to Pier Luigi Bersani. Bersani, who led in opinion polls throughout the two-month race, campaigned to maintain the budget rigor of outgoing Prime Minister Mario Monti. Bets Japan’s Prime Minister Shinzo Abe will nominate a central bank chief who favors stimulus pushed stocks higher earlier today.

Spending Cuts

This week’s March 1 deadline to avoid automatic U.S. spending cuts may get investors’ attention. It marks another fiscal showdown between President Barack Obama and congressional Republicans. If Congress doesn’t act, federal spending will be reduced by $85 billion in the final seven months of this fiscal year and by $1.2 trillion over the next nine years.

The S&P 500 has gained 4.3 percent this year as U.S. lawmakers agreed on a compromise on taxes in January and amid better-than-estimated corporate earnings. About 75 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.7 times reported earnings, below the average since 1954 of 16.4.

‘Capital Spending’

“Continued earnings momentum and rising corporate confidence suggest improved capital spending this year,” said James Paulsen, the chief investment strategist at Minneapolis- based Wells Capital Management, which oversees about $325 billion.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 34 percent to 18.99. The gauge had the biggest jump since August 2011 after sliding to the lowest level since April 2007 on Feb. 19.

All 10 groups in the S&P 500 fell today as financial and commodity shares had the biggest losses. The Morgan Stanley Cyclical Index, which includes shares of companies most tied to economic growth, slid 2.5 percent, the most since June 25. A measure of 11 homebuilders in S&P indexes dropped 3.9 percent.

Lowe’s Slips

Lowe’s tumbled $1.81 to $35.86 for the biggest drop since August. The second-largest U.S. home-improvement retailer said profit this year will be about $2.05 a share, below the average analyst estimate of $2.10. Spending on store improvements and hiring will also weigh on profitability in 2013, Chief Financial Officer Robert Hull told analysts today on a conference call.

Chesapeake Energy declined $1.39 to $19.11. Sinopec, as China’s second-largest energy producer is known, will pay $1.02 billion in cash for a 50 percent interest in 850,000 acres Chesapeake controls in the Mississippi Lime formation, the companies announced in separate statements. The price equates to $2,400 an acre, less than the $7,000 to $8,000 at which Oklahoma City-based Chesapeake valued the asset in a July presentation.

ITT Educational tumbled $3.10 to $15.53. The Securities and Exchange Commission demanded documents relating to “actions and accounting” for the private loan programs, which helped students pay for education costs that weren’t covered by state, federal and other funding sources, Carmel, Indiana-based ITT said Feb. 22 in a filing.

Dynavax, Affymax

Dynavax Technologies Corp. dropped 32 percent to $2.01. The drugmaker seeking to bring its first product to market fell after U.S. regulators rejected the company’s hepatitis B vaccine.

Affymax Inc. sank 85 percent to $2.42 after the drugmaker and partner Takeda Pharmaceutical Co. voluntarily recalled an anemia treatment for kidney dialysis patients after reports of three fatal reactions.

Hertz Global Holdings Inc. (HTZ) gained 1.7 percent to $19.04. The largest publicly traded U.S. auto-rental chain projected profit and sales that beat estimates as it benefits from its acquisition of Dollar Thrifty Automotive Group Inc.

BlackBerry, formerly known as Research In Motion Ltd (BB)., added 0.5 percent to $13.25. Sales of BlackBerry 10 devices are above the company’s “ambitious” expectations and production has been increased, chief executive officer Thorsten Heins told Frankfurt Allgemeine.

Digital Books

Barnes & Noble Inc. added 11 percent to $15.06 after Chairman Leonard Riggio said he will offer to buy the stores and website of the chain he founded more than 40 years ago as it struggles to navigate the rising popularity of digital books.

Zynga Inc. rose 7.5 percent to $3.43. The biggest maker of online social games surged on optimism that other U.S. states may follow Nevada in legalizing real-money gambling over the Internet.

CME Group Inc., the world’s largest futures exchange, has approached Deutsche Boerse AG (DB1) to consider beginning talks on a merger, according to four people familiar with the situation.

A combination of Chicago-based CME and Deutsche Boerse (DB1) would unite the biggest futures exchanges in the U.S. and European markets. CME shares have rallied 15 percent this year, giving it a market capitalization of $19.4 billion. Deutsche Boerse climbed 1 percent through Feb. 22, bringing its value to 9 billion euros ($11.9 billion).

The companies met again last month to debate whether to begin formal takeover talks and haven’t yet made a decision, the people said. No offer has been made, nor have terms been discussed, they said.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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