S&P 500 Caps First Weekly Drop Since Sept.
U.S. stocks fell, driving the Standard & Poor’s 500 Index to its first weekly decline since September, as a disagreement on Europe’s resources to fight the debt crisis offset a drop in the American unemployment rate.
Bank of America Corp. (BAC) tumbled 6.1 percent as a plan to bolster its balance sheet renewed concern that shareholders may see their stakes diluted. American International Group Inc. (AIG) slumped 2.9 percent after posting its biggest loss since 2009. Jefferies Group Inc. (JEF) reversed a drop of as much as 7.4 percent after saying it will increase disclosure of European holdings. Groupon Inc. surged 31 percent in its initial day of trading.
The S&P 500 dropped 0.6 percent to 1,253.23 as of 4 p.m. New York time, after falling as much as 1.8 percent earlier. The gauge was down 2.5 percent this week. The Dow Jones Industrial Average slid 61.23 points, or 0.5 percent, to 11,983.24.
“Today’s jobs report does little to alleviate concern,” Mohamed A. El-Erian, the chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in an e-mail. His firm runs the biggest bond fund. “Initial indications suggest that G-20 leaders are having difficulties agreeing on the relatively easy items on their agenda. This bodes badly for the more difficult issues that also need coordinated measures on the part of the G-20.”
Benchmark gauges tumbled earlier this week as Greek Prime Minister George Papandreou announced on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on a European Union aid package needed to avert default. Equities rebounded yesterday as Greece abandoned the referendum, moving closer to accepting the bailout.
Fail to Agree
Global stocks slumped today as the Group of 20 nations failed to agree on increasing the International Monetary Fund’s resources to fight Europe’s debt crisis. Ruling party lawmakers urged Papandreou to step aside and allow the formation of a new government that can approve the bailout plan for Greece. Papandreou may propose Finance Minister Evangelos Venizelos as his replacement, Mega TV reported.
The unemployment rate unexpectedly fell to a six-month low of 9 percent from 9.1 percent, even as the labor force expanded. The 80,000 increase in payrolls followed gains in the prior two months that were revised up by 102,000. The Citigroup Economic Surprise Index for the U.S., which measures the rate at which data is beating or trailing economists’ forecasts, is at 18.7, the highest since April. It rose from minus 117.2 on June 3.
Stocks Trim Losses
Stocks pared losses amid speculation European leaders will make further progress on taming the debt crisis over the weekend, according to Russ Koesterich at BlackRock Inc. (BLK)
“If you can get any clarity on Europe, you can move higher,” Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock, said in a telephone interview. His firm oversees $3.3 trillion as the world’s largest asset manager. “Plus, the jobs report wasn’t bad. The labor market isn’t growing fast enough, but it doesn’t appear to be falling backwards either.”
Financial stocks had the biggest decline in the S&P 500 among 10 industries, falling 1.4 percent as a group. The KBW Bank Index dropped 1.5 percent as 21 of its 24 companies slid.
Bank of America lost 6.1 percent to $6.49. The bank said it may exchange preferred securities for a total of $6 billion of common shares and debt, a plan that could cut interest and dividend costs and improve capital levels. The firm may issue 400 million shares and $3 billion of senior notes, taking advantage of lower prices for the bank’s existing securities.
“It looks like this will be dilutive to shareholders, but that’s the minor issue,” Richard Bove, an analyst with Rochdale Securities LLC in Lutz, Florida, said in a telephone interview. “The major issue is they said they wouldn’t issue stock, and this may be one too many statements to investors that didn’t turn out true.”
AIG slumped 2.9 percent to $23.91. The quarterly loss casts doubt on the insurer’s ability to benefit from more than $25 billion in assets that can be used to lower future tax bills. The fourth quarter will be “very important” in determining whether AIG can lower a so-called valuation allowance that has restricted the company’s use of the tax assets, the insurer said late yesterday.
MF Global Holdings Ltd. (MF) tumbled 7.9 percent to 26 cents. Jon Corzine, who joined the company 20 months ago to transform the futures broker into an investment bank, quit as chairman and chief executive officer amid regulatory probes and after the firm filed the eighth-largest bankruptcy in U.S. history.
Jefferies gained 0.5 percent to $12.07. Trading in Jefferies’s stock was halted twice yesterday and the shares plunged as much as 20 percent, the most ever, after Egan-Jones Ratings Co. downgraded the investment bank’s debt, citing large “sovereign obligations” relative to equity.
Groupon, trading under the symbol GRPN, soared 31 percent to $26.11. It surged as much as 56 percent earlier. The biggest online-coupon provider sold 35 million shares at $20 each, the largest initial public offering by a U.S. Internet company since Google Inc. raised $1.9 billion in its 2004 initial offering.
Genworth Financial Inc. (GNW) surged 17 percent, the most in the S&P 500, to $7.19. The company said it will sell a stake in its Australian mortgage-guaranty business next year and may buy back stock. As much as 40 percent of the Australian unit may be sold in an IPO set for the second quarter of 2012, the Richmond, Virginia-based company said late yesterday.
Brew at Home
Starbucks Corp. (SBUX) rallied 6.7 percent to $44.19. The world’s largest coffee-shop operator said fourth-quarter profit rose 29 percent as U.S. sales increased. Chief Executive Officer Howard Schultz has sought to boost sales by selling Via instant coffee that customers can brew at home.
JPMorgan Chase & Co. (JPM) raised its 2011 earnings-per-share estimate for the S&P 500 to $97.75 from $97, citing “impressive” third-quarter profits. Per-share earnings beat estimates at about three-quarters of the companies in the S&P 500 that released results since Oct. 11, according to data compiled by Bloomberg.
McGraw-Hill Cos., CME Group and News Corp.’s Dow Jones agreed to join their index businesses, bringing the S&P 500 and Dow average under common ownership.
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