Bloomberg News

U.S. Stocks Fall, Leaving S&P 500 Virtually Unchanged for Year

December 30, 2011

Dec. 30 (Bloomberg) -- U.S. stocks fell, leaving the Standard & Poor’s 500 Index virtually unchanged for the year, as concern over Europe’s debt crisis overshadowed optimism that the American economy will expand in 2012.

JPMorgan Chase & Co., the largest U.S. bank by assets, paced declines among financial companies after Spain said its budget deficit will be larger than previously forecast. Sears Holdings Corp. retreated 3.4 percent after Fitch Ratings downgraded its long-term default ratings. Freeport-McMoRan Copper & Gold Inc. rose 0.7 percent as the price of gold climbed for the first time in more than a week.

The S&P 500 fell 0.4 percent to 1,257.60 at 4 p.m. New York time. The gauge dropped 0.2 percent in the final 10 minutes of trading, erasing its 2011 advance. The Dow Jones Industrial Average lost 69.48 points, or 0.6 percent, to 12,217.56, trimming its gain for the year to 5.5 percent. About 4.1 billion shares changed hands on all U.S. exchanges, the third-slowest full-day session of the year and 45 percent below the three- month average, according to Bloomberg data.

“Everyone kind of had a negative outlook on the year,” Gerry Milligan, co-head of U.S. program trading at Instinet Inc. in New York, said in a telephone interview. “The fact that the S&P ended slightly negative on the year just put a nice end note to a challenging year.”

The benchmark index for American equities capped its smallest annual change since 1947. The measure was poised to extend its two-year annual advance until a two-point decline completed in the final seconds of trading sent the index down 4/100ths of a point for the year. The S&P 500 rallied 23 percent in 2009 and 13 percent in 2010.

Strategists’ Forecast

Wall Street strategists’ average forecast at the beginning of the year that the S&P 500 would rise to 1,371 in 2011 proved 9 percent too high, according to a Bloomberg News survey. Forecasters predict the index will advance to 1,348 next year.

Still, both the S&P 500 and the Dow are among the 10 best performers this year among 91 national indexes tracked by Bloomberg. The S&P 500 started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear-market low to 102 percent.

The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, and sank further amid concern that Europe’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.

Market Rebound

The market rebounded amid tumbling valuations and data signaling that the world’s largest economy was weathering Europe’s crisis. The U.S. unemployment rate fell to 8.6 percent in November, the lowest since March 2009, after lingering at 9 percent or above for seven straight months.

The S&P 500’s price-earnings multiple reached the lowest level in more than two years on Oct. 3, falling to 11.6, a 27 percent decline from its high in February of 15.8. The gauge’s valuation closed at 13.2 for the year. An 11 percent rally since the end of September gave the S&P 500 its best fourth quarter since 2003.

The S&P 500 rose 1.1 percent yesterday amid further signs of strength in the U.S. economy. Stock fell today after Spain said its budget deficit will reach 8 percent of gross domestic product this year, more than the previous forecast of 6 percent. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said economic growth in the euro region “isn’t good” and economies are only growing in some Asian and African countries.

‘Downside Pressure’

China’s official Xinhua News Agency reported the world’s second-largest economy may face “downside pressure” next year, even though growth will be more than 9 percent in 2011.

“One of the biggest takeaways is that the U.S. did so much better than everybody else,” Howard Silverblatt, the New York- based senior index analyst at Standard & Poor’s, said in a telephone interview. “There was a big variance in the year. The financials and the materials got hit but there were a lot of winners.”

Financial shares fell the most among the 10 main industries in the S&P 500 this year, losing 18 percent as a group, followed by a decline of 12 percent in raw-material producers. Utilities, consumer-staples providers and health-care companies, among stocks considered the least sensitive to economic prospects, rose at least 10 percent for the top gains.

JPMorgan Chase erased 0.5 percent to $33.25 today, while Citigroup Inc. lost 1.7 percent to $26.31. Financial stocks tumbled 0.6 percent as a group.

Bank of America

Bank of America Corp. rose 1.8 percent to $5.56, after falling as much as 1.7 percent earlier. The bank was the year’s worst performer in the Dow as concern about mounting mortgage losses and a global economic slowdown weighed on the second- biggest U.S. lender.

Sears retreated 3.4 percent to $31.78. Fitch downgraded the long-term default ratings of the retailer to CCC from B, after the company said this week it will close as many as 120 Kmart and Sears full-line stores.

AMR Corp. tumbled 32 percent to 35 cents for the biggest retreat in the Russell 1000 Index. NYSE Euronext said shares of the parent of American Airlines will be removed from the New York Stock Exchange before trading begins on Jan. 5, following the Fort Worth, Texas-based company’s bankruptcy filing on Nov.29.

Freeport-McMoRan climbed 0.7 percent to $36.79. Gold added 1.7 percent to $1,566.8 an ounce, capping an 11th straight annual gain.

--With assistance from Peter Levring in Copenhagen and Hugh Son in New York. Editors: Jeff Sutherland, Michael P. Regan

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Katia Porzecanski in New York at kporzecansk1@bloomberg.net

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


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