Bloomberg News

U.S. Stocks Pare Losses on Optimism Greece to Commit to EU Plan

February 14, 2012

Feb. 14 (Bloomberg) -- U.S. stocks pared losses in the last half hour of trading amid optimism Greek leaders will commit to austerity measures needed for a second bailout.

The Standard & Poor’s 500 Index slid 0.1 percent to 1,350.50 at 4 p.m. New York time, trimming an earlier decline of as much as 0.8 percent. The Dow Jones Industrial Average rose 4.24 points, or less than 0.1 percent, to 12,878.28 today.

Stocks recovered after Reuters reported that Greece’s Conservative Party leader will deliver a letter of commitment to lenders tomorrow, citing a government source.

Stocks slumped earlier amid data showing that U.S. retail sales rose 0.4 percent in January, half the 0.8 percent forecast of economists in a survey. European finance ministers canceled a meeting scheduled for tomorrow as Luxembourg Prime Minister Jean-Claude Juncker said he has yet to receive the political assurances from Greek lawmakers about austerity measures required for the 130 billion euros ($170 billion) bailout.

The S&P 500 yesterday closed less than 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The Morgan Stanley Cyclical Index of 30 stocks dropped 1.3 percent amid concern about economic growth. The index surged 11 percent in January as the U.S. economy showed signs of accelerating and European leaders moved closer to a solution on the region’s debt crisis.

‘Very Choppy’

“The thing with a lot of the economic data is that it’s just very choppy,” Paul Simon, chief investment officer at Tactical Allocation Group LLC in Birmingham, Michigan, said in a phone interview. His firm oversees $1.6 billion. “You’ve had a significant run-up in the market and you haven’t really had any significant pullback. We approached the highs of 2011 and that’s going to be a resistance in the very, very short term.”

Dividend-paying stocks are still a “winning theme” for investors even though they have gotten off to a relatively slow start this year, according to Gina Martin Adams, a strategist at Wells Fargo Securities LLC.

While the Standard & Poor’s 500 Dividend Aristocrats Index rose 4.2 percent for the year through yesterday, the gain was 2.6 percentage points smaller than the S&P 500’s advance. By contrast, the indicator fared better than the S&P 500 in the past two years, its first back-to-back wins since 2002. The index is comprised of companies that have raised payouts for at least 25 consecutive years, relative to the S&P 500.

Payout ratios suggest companies can distribute plenty more money to shareholders, Martin Adams wrote yesterday in a report. She noted that dividends equal 27 percent of S&P 500 earnings, the lowest figure in more than a century, according to data compiled by Yale University Professor Robert Shiller.

“Companies may be only just beginning to catch on to the fact that investors are keenly interested in dividend-paying stocks,” the report said.

--With assistance from David Wilson in New York. Editors: Jeff Sutherland, Michael P. Regan

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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