U.S. Stocks Fall as Greek Debt Concern Weighs on Banks

30 Mar 2012

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U.S. stocks declined, sending benchmark indexes lower for a third straight day, Thursday, after Standard & Poor’s said Greece may have to restructure its debt again.

Bank of America Corp. and Citigroup Inc. fell more than 2.1 percent to pace losses in financial companies. Best Buy Co. (BBY), the world’s largest consumer-electronics retailer, slumped 7.3 percent on plans to close 50 stores as sales missed forecasts. AT&T Inc. (T), Verizon Communications Inc. (VZ) and American Express Co. (AXP) slid at least 1 percent on analysts’ downgrades. Red Hat Inc. (RHT) surged 19 percent after profit and sales topped projections.

The S&P 500 retreated 0.5 percent to 1,397.92 at 2:32 p.m. New York time Thursday. The benchmark gauge for U.S. equities has dropped 1.3 percent in three days. The Dow Jones Industrial Average lost 37.65 points, or 0.3 percent, to 13,088.56 Thursday. The Russell 2000 Index (RTY) of small companies declined 0.7 percent to 829.02, according to Bloomberg report..

“People are taking some chips off the table,” said Matt McCormick, who helps oversee $5.8 billion at Bahl & Gaynor Inc. in Cincinnati. “It’s been a good run and people are questioning: is that sustainable? The measures taken by European authorities have put those issues in the back burner. If that narrative changes, it makes people address something that they thought was already taken care of.”

Stocks slumped as S&P said Greece may have to restructure again. There may be “down the road, I’m not predicting Thursday when, another restructuring of the outstanding debt,” said Moritz Kraemer, head of sovereign ratings at S&P. Holders of Greece’s international bonds issued under foreign laws are pushing back against attempts to restructure their securities.
Economic Data

In the U.S., claims for unemployment benefits fell to the lowest since April 2008. The economy grew at a 3 percent annual rate from October through December, separate data showed.

“There’s nothing to drive the market higher today,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “Europe is still an ongoing work in progress. Investors need to get used to that. We were off to a wonderful start.”
A three-day drop trimmed the S&P 500 (SPX)’s gain since the start of this year to 11 percent. Stocks rallied this year amid better-than-estimated economic data and expectations Europe would tame its crisis. The benchmark measure has risen 2.3 percent in March, headed for a fourth straight month of gains.

Nine out of 10 groups in the S&P 500 fell as financial and telephone shares had the biggest losses. The Morgan Stanley Cyclical Index of companies most-tied to the economy slid 0.7 percent. The Dow Jones Transportation Average fell 0.5 percent. A gauge of homebuilders in S&P indexes sank 2.7 percent.
Banks Slump

The KBW Bank Index (BKX) slumped 1.6 percent as all of its 24 stocks declined. A measure of European lenders dropped 2.9 percent. Bank of America lost 2.7 percent to $9.49. Citigroup slid 2.2 percent to $36.24.

Best Buy tumbled 7.3 percent to $24.67. Chief Executive Officer Brian Dunn trimmed discounts after the holiday shopping season, sacrificing sales to maintain profitability. The retailer is closing big-box stores and cutting jobs to reduce costs while boosting online sales and opening smaller locations.

Some of the largest companies fell after analyst downgrades. American Express dropped 2.7 percent to $57.44 after Wells Fargo & Co. cut the stock to the equivalent of neutral. Robert W. Baird & Co. downgraded the shares of the two largest U.S. phone companies, sending AT&T down 1 percent to $31.04 and Verizon 1.3 percent lower to $37.78.
Mosaic Co. (MOS) slid 5.9 percent to $54.78. The largest U.S. potash producer said earnings fell to 64 cents a share in the quarter ended Feb. 29 from $1.21 a year earlier. That missed the 69-cent average estimate of 19 analysts compiled by Bloomberg.
Big Lots

Big Lots Inc. (BIG) sank 5.3 percent to $43.19. The discount retailer’s sales trends are “not as good as we’d hoped,” Charles Grom, an analyst with Deutsche Bank AG, wrote in a note after meeting with the company’s management.
Red Hat surged 19 percent, the most in the S&P 500, to a 12-year high of $61.27. The company was surprised by demand for its Red

Hat Enterprise Linux software from corporations preparing to move more applications to the so-called cloud, where they can be delivered to users over the Internet, Chief Executive Officer Jim Whitehurst said in an interview. Profit for the current fiscal year will be as much as $1.20 a share, the company projected, exceeding estimates.
Health maintenance organizations rose. Investors are speculating the U.S. Supreme Court will overturn aspects of the Affordable Care Act, benefiting managed care companies, according to Dave Shove, an analyst at BMO Capital Markets. Aetna Inc. (AET) added 5.9 percent to $49.27. UnitedHealth Group Inc. (UNH) rallied 4.4 percent to $57.89.
M&A Deals

Illumina Inc. (ILMN) climbed 4.3 percent to $52. Roche Holding AG raised its hostile takeover offer for Illumina by 15 percent to about $6.7 billion, yielding to demands for a higher price from shareholders of the U.S. maker of gene-mapping tools.
Collective Brands Inc. (PSS) jumped 8.4 percent to $19.98. South Korean clothing company E-Land Group said it will bid for the retailer, which owns the Payless ShoeSource chain.

Global dealmaking slumped for a third straight quarter as chief executive officers funneled cash into share buybacks and new products, a trend that may reverse in the coming months as the economic recovery gains momentum. Mergers and acquisitions so far this quarter fell 14 percent from the fourth quarter to $418 billion, making it the slowest three-month period in 2 1/2 years, according to data compiled by Bloomberg.

“I still think big cash surpluses will lead to more M&A because companies fundamentally want to grow,” said Peter Tague, who started as co-head of global M&A at Citigroup (C) in New York this month.
500-Point Range

The S&P 500 will likely remain stuck in the 500-point range where it’s been four-fifths of the time since 2000 until the Federal Reserve allows interest rates to rise, according to Piper Jaffray Cos.

The benchmark measure fell in the previous two days after reaching 1,416.51, the highest level since May 2008 and 9.5 percent below its record high of 1,565.15 from 2007. The index has traded between 1,000 and 1,500 for about 80 percent of the time since 2000, according to data compiled by Bloomberg.

Equity gains stalled in the past 12 years as the economy suffered from the bursting of bubbles in technology and real estate, forcing the central bank to cut its benchmark interest rate to near zero from 6.5 percent to spur growth. Fed Chairman Ben S. Bernanke has pledged to keep borrowing costs low through at least late 2014.

Tags: Business, World, U.S, Stocks, Greek Debt

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