Most U.S. Stocks Fall on FedEx Outlook, Drop in Housing Starts
Most U.S. stocks fell, with a late- day rebound failing to extend yesterday’s rally in the Standard & Poor’s 500 Index, after housing starts dropped and FedEx Corp.’s profit forecast trailed estimates.
FedEx slid 6 percent after saying rising health-care and pension costs will constrain earnings. Fannie Mae and Freddie Mac sank more than 38 percent as regulators ordered them to delist their stock from exchanges. BP Plc’s U.S. shares rose 1.4 percent, triggering a short-lived rebound in energy shares that briefly pushed the market higher, after agreeing to a $20 billion fund to pay damages from the Gulf of Mexico oil spill.
About three stocks fell for every two that rose on U.S. exchanges. The S&P 500 slipped 0.1 percent to 1,114.61 at 4 p.m. in New York after climbing as much as 0.3 percent. The Dow Jones Industrial Average gained 4.69 points, or less than 0.1 percent, to 10,409.46.
“The market is trading on headline news and we’re all focused on that underwater camera in the Gulf,” said Frank Ingarra, a Stamford, Connecticut-based money manager at Hennessy Advisors Inc., which oversees $800 million. “Investors are very skittish and we continue to have our other big headlines.”
The S&P 500 rallied 2.4 percent yesterday to 1,115.23, the highest since May 18. The advance sent the index about 6.5 points above its average level in the past 200 days, considered significant by investors who base trading decisions on chart patterns. The gauge remained above the trend line today.
Recovery After Tumble
The index tumbled 14 percent from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP’s leaking well triggered the worst oil spill in U.S. history. The S&P 500 has since rebounded 6.1 percent as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery.
FedEx fell 6 percent to $78.07 for the biggest drop in the S&P 500. The largest U.S. air-cargo carrier expects a fiscal 2011 profit of $4.40 to $5 a share. The average estimate of analysts surveyed by Bloomberg was a profit of $5.07 a share.
“Sentiment right now is fairly negative,” said Michael K. McCarty, managing partner at Differential Research LLC. “FedEx is a good peek into the economy because they ship so much and when they disappoint it confirms that the economy remains weak across a broad sector of industries.”
BP rose 1.4 percent to $31.85. The company will cancel dividend payments for the first three quarters of the year and has agreed to put about $20 billion into a fund to pay damages resulting from the Gulf of Mexico oil spill, with claims administered by Kenneth Feinberg, the lawyer who oversaw executive compensation for the government’s financial bailout.
“It puts hard numbers around quantity,” said Evan Smith, who helps manage $2 billion at U.S. Global Investors Inc., including shares of Anadarko Petroleum Corp., the company that owns a 25 percent stake in BP’s well. “High estimates I’ve seen have been $30 billion or $40 billion and this is less than that. I’d imagine that’s incrementally positive.”
Energy stocks fell 0.2 percent as a group among 10 industries in the S&P 500. The sector fell as much as 1.1 percent earlier.
Apple rose 2.9 percent to $267.25. The world’s most valuable technology company logged more than 600,000 early orders for the iPhone 4 yesterday, a record, imposing a strain on computer systems that prompted carrier AT&T Inc. to suspend sales of the device before its June 24 debut.
Technology stocks increased 0.2 percent, the third-biggest gain after utility and health-care companies among 10 industries in the S&P 500.
Three erroneous orders in Washington Post Co. shares briefly caused the stock to double, making it the first U.S. company to be halted by circuit breakers imposed following the May 6 crash that erased $862 billion from equities in 20 minutes.
The trades totaling 766 shares at $919.18 or $929.18 crossed on NYSE Euronext’s NYSE Arca electronic platform at 3:07:30 p.m. New York time, according to data compiled by Bloomberg. That compared with a price of $462.84 before the jump. After the halt, it traded at $457.69 as of 3:46 p.m. The transactions in question were later canceled, the data show.
Home Depot lost 0.4 percent to $32.14. Housing starts fell 10 percent to a 593,000 annual rate last month, the lowest level this year, from a revised 659,000 pace in April that was less than previously estimated, Commerce Department figures showed.
The S&P 500’s Consumer Discretionary Sector Index dropped 0.6 percent for the biggest decline among 10 industry groups in the benchmark index for U.S. equities.
Alcoa Inc., the largest U.S. aluminum maker, fell the most in the Dow, retreating 1.7 percent to $11.41.
“The market is driven by sentiment and what we see now is all a continuum of the problems that exist inside the credit system in particular,” said Liam Dalton, who oversees $1.4 billion as president of Axiom Capital Management in New York. “Expectations for corporate earnings are probably set too high given that we see the economic data is beginning to slow.”
Analysts have lifted their average 2010 earnings growth forecasts for the S&P 500 to about 32 percent from 26 percent at the end of March.
Fannie Mae shares tumbled 39 percent to 56 cents and Freddie Mac plummeted 38 percent to 75 cents after regulators told them to delist their common and preferred shares from the New York Stock Exchange. The mortgage firms 80 percent-owned by U.S. taxpayers will be quoted on the over-the-counter Bulletin Board once they’re de-listed from the NYSE.
Sunoco Inc. advanced the most in the S&P 500, gaining 6.3 percent to $34.27. The Philadelphia refinery said it will separate SunCoke Energy from the remainder of Sunoco in the first half of 2011 as part of a strategy designed to unlock shareholder value.