Bloomberg News

S&P 500 Poised for First Weekly Drop Since September on Europe

November 04, 2011

Nov. 4 (Bloomberg) -- U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its first weekly drop since September, as concern about European financing offset an unexpected decrease in the American unemployment rate.

All 10 groups in the S&P 500 retreated as financial and industrial companies had the biggest declines. Bank of America Corp. and General Electric Co. decreased at least 2.4 percent. American International Group Inc. slumped 4.9 percent after the bailed-out insurer posted its biggest loss since 2009. Groupon Inc. advanced 42 percent after the largest online-coupon provider raised $700 million in its initial public offering.

The S&P 500 sank 1.3 percent to 1,244.85 as of 11:58 a.m. New York time. The benchmark gauge for American equities was down 3.1 percent this week. The Dow Jones Industrial Average slumped 148.38 points, or 1.2 percent, to 11,896.09 today.

“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, wrote 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.”

Global stocks slumped as the Group of 20 nations failed to agree on increasing the resources of the International Monetary Fund, dashing the hopes of European governments keen to tap more foreign aid. In the U.S., the unemployment rate 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.

‘Bottom Line’

“The bottom line is we’re making progress on the jobs front, but not enough to offset concerns about Europe,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “The jobs report was reasonably good, especially when you throw in the revisions. Still, Europe is a story that doesn’t go away.”

The S&P 500 rose for a second day yesterday as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates. Earlier this week, a two- day slump sent the S&P 500 to the level where three rallies stopped in August and September, the top of a price range that prevailed for 10 weeks. The index rose above that level last week amid progress on Europe’s bailout plans.

Banks Tumble

A measure of financial stocks had the biggest decline in the S&P 500 among 10 industries, falling 2.1 percent, as European lenders sank. Bank of America dropped 4.1 percent to $6.63. JPMorgan Chase & Co. declined 2.5 percent to $33.53.

AIG tumbled 4.9 percent to $23.42. 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 company posted a $4.11 billion third-quarter loss that wiped out profit from the first six months of the year.

Concern about the pace of global growth sent the Morgan Stanley Cyclical Index down 1.5 percent. The Dow Jones Transportation Average lost 1.8 percent. GE fell 2.4 percent to $16.27. FedEx Corp. retreated 1.6 percent to $81.04.

Groupon, trading under the symbol GRPN, soared 42 percent to $28.48. It surged as much as 56 percent earlier. The company sold 35 million shares at $20 each, the largest IPO by a U.S. Internet company since Google Inc. raised $1.9 billion in its 2004 initial offering.

LinkedIn Tumbles

LinkedIn Corp. tumbled 9.1 percent to $79.52 as spending on research and development drove the professional-networking website to a loss. The company, which first sold shares to the public in May, is increasing spending on research, sales and marketing, and office expansions to boost the company’s global presence and attract more recent college graduates to the site.

Starbucks Corp. rallied 7 percent to $44.30. 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.

--Editor: Jeff Sutherland

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

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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