Bloomberg News

U.S. Stocks Fall After S&P 500 Climbs to Four-Year High

March 02, 2012

U.S. stocks retreated, almost erasing a weekly gain for the Standard & Poor’s 500 Index, amid concern that a rally that drove the benchmark gauge to the highest level since 2008 has outpaced global growth prospects.

Commodity and industrial shares had the biggest declines among 10 groups in the S&P 500. Anadarko Petroleum Corp. (APC) and Caterpillar Inc. dropped at least 1.1 percent to pace losses among the largest companies. Big Lots Inc. (BIG) slumped 4.1 percent as sales missed analysts’ estimates. Yelp Inc., the site that lets users review everything from diners to dentists, advanced as much as 73 percent in its first day of trading.

The S&P 500 fell 0.4 percent to 1,368.86 at 2 p.m. New York time, trimming its weekly gain to 0.2 percent. The Dow Jones Industrial Average slid 27.33 points, or 0.2 percent, to 12,952.97. The Russell 2000 Index lost 1.3 percent to 804.40. More than 3.8 billion shares changed hands on U.S. exchanges.

“Some people may think that the market is a bit ahead of itself after the rally in stocks,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. His firm oversees about $220 billion. “There’s concern about a potential slowdown as a result of Europe’s debt crisis. People seem to have been more relaxed about the situation in Europe, but when you look closely you see that the underlying issues remain unresolved.”

The euro weakened as Spain raised its budget-deficit target for 2012 and German retail sales unexpectedly declined. Spanish Prime Minister Mariano Rajoy announced a new deficit estimate of 5.8 percent of gross domestic product compared with the 4.4 percent target previously agreed with the European Union.

Best Start

The S&P 500 has risen 25 percent since its October low for the best start to a year since 1991 (SPX) amid better-than-estimated earnings and economic data. Yet the index trades at about 14.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

“There’s a whole too far, too fast thing,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in a telephone interview. His firm oversees more than $12 billion. “We don’t think that means it’s going to have a huge pullback, but a consolidation would be a relief.”

Nine out of 10 groups in the S&P 500 declined, led by companies most-tied to the economy. The Dow Jones Transportation Average, a proxy for economic growth, dropped 1 percent. Anadarko Petroleum lost 4.1 percent to $82.29, pacing losses in energy shares as oil fell the most since December. Caterpillar (CAT) decreased 1.1 percent to $112.18. Morgan Stanley (MS) lost 1.1 percent to $18.98.

Big Lots

Big Lots slid 4.1 percent to $42.67 after reporting fourth- quarter sales of $1.63 billion. On average, analysts surveyed by Bloomberg estimated $1.66 billion.

Travelers Cos. (TRV) lost 1.1 percent to $57.79. The only insurer in the Dow Jones Industrial Average was downgraded to “equal weight” at Morgan Stanley. That means the stock’s total return is expected to be in line with the average for its industry peers over the next 12 to 18 months. The previous rating was “overweight.”

Overstock.com Inc. (OSTK) slumped 13 percent to $6.01. The online discount retailer reported fourth-quarter sales of $314.1 million, trailing the average estimate of $377.5 million from two analysts in a Bloomberg survey.

Yelp climbed 63 percent to $24.42. The San Francisco-based company raised $107.3 million in the IPO, pricing the shares at $15 each, according to a statement yesterday. The company earlier offered them for $12 to $14.

Spinoff, Dividend

Sara Lee Corp. (SLE) added 7.7 percent to $21.96. Its international coffee company, which includes the Douwe Egberts, Senseo and Moccona brands, filed for a spinoff under the name DE International Holdings NV. After the separation, the coffee company will declare a special $3 dividend.

Wynn Resorts Ltd. (WYNN) jumped 6.3 percent to $129.69, as the stock resumed trading following an hour-and-a-half halt. The Las Vegas-based operator of its namesake and Encore casinos retracted a regulatory filing that suggested the company had completed a land concession contract on its proposed resort and casino in the Cotai area of Macau.

Facebook Inc. hired Deutsche Bank AG, Credit Suisse Group AG and Citigroup Inc. to work on its $5 billion initial public offering, bringing the total of banks on the deal to nine, said a person with direct knowledge of the situation.

Facebook’s new and existing banks will grant the company an additional credit line of more than $2.5 billion, said the same person, who declined to be identified as the decision isn’t public. The moves will be disclosed in a new regulatory filing in a couple of weeks, said the person.

More Muted

Price swings in the S&P 500 have become more muted this year, making investors complacent about the outlook for stocks, according to Canadian brokerage firm Brockhouse & Cooper Inc.

There have been no daily swings of 2 percent or more in either direction this year, compared with more than 25 occurrences in the second half of 2011, when Europe’s sovereign- debt crisis triggered a drop in equities. The lower chart panel tracks the Chicago Board Options Exchange Volatility Index, or VIX, known as the market’s “fear gauge.”

“Volatility tends to come with negative surprises, and it’s been quiet since December,” said Pierre Lapointe, a strategist at the Montreal-based brokerage. “But quiet periods usually don’t last. There is a risk of complacency. This is a low volatility environment and investors shouldn’t think this is the new norm.”

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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