Bloomberg News

U.S. Stocks Fall for Week as Jobs Data, ECB Damp Optimism

July 07, 2012

U.S. Stocks Decline for Week as Jobs Data

U.S. payrolls rose 80,000 in June after a 77,000 increase in May, Labor Department figures showed in Washington on Friday. The jobless rate held at 8.2 percent. Photographer: Scott Eells/Bloomberg

U.S. stocks fell for the week, after the Standard & Poor’s 500 Index reached a two-month high, as jobs data heightened concern about a slowing economy and Europe’s efforts to tame its debt crisis disappointed investors.

Industrial and financial stocks lost the most in the S&P 500 in the holiday-shortened week, sinking more than 1.2 percent, as eight out of 10 industries in the benchmark index retreated. JPMorgan Chase & Co. (JPM:US), Bank of America Corp. (BAC:US) and General Electric Co. (GE:US) led declines in the Dow Jones Industrial Average. Netflix Inc. (NFLX:US) surged 20 percent after an analyst said the company’s online audience exceeds cable and TV networks.

The S&P 500 lost 0.6 percent to 1,354.68 for the week, trimming its gain for the year to 7.7 percent. The Dow dropped 107.62 points, or 0.8 percent, to 12,772.47. Global stocks surged the previous week, with the S&P 500 rallying 2 percent, amid optimism that an agreement by European leaders would help contain the region’s debt crisis.

“The jobs report is the single most important economic statistic and unfortunately it’s not showing signs of health, which is weighing down on stocks,” said Lawrence Creatura, who helps oversee $363.6 billion as a Rochester, New York-based fund manager at Federated Investors Inc. “Europe has become a multi- year yo-yo of increasing expectations and subsequent disappointment.”

The S&P 500 erased a 0.4 percent advance for the week in the final session after American employers hired fewer workers than forecast in June, showing the labor market is making scant progress toward reducing joblessness. The unemployment rate held at 8.2 percent.

Cutting Rates

Investors entered the July 4 holiday with the S&P 500 at a two-month high as speculation grew that policy makers would act to spur economic growth. That advance came to a halt on July 5 after the European Central Bank reduced its benchmark rate to a record low, while President Mario Draghi said the cut may have only a limited effect on the euro-area economy. China also lowered rates in a bid to expand investments and consumption.

“Although the stimulus junkies liked the news from the ECB and China, the public comments of Mario Draghi clearly carried the most weight,” Mike Shea, a managing partner at New York- based brokerage firm Direct Access Partners LLC, said in an interview. “We start out the U.S. earnings season on a decidedly lousy note with the jobs report missing already low expectations, and anybody who was thinking we have set the bar low enough on earnings may run back and reassess their numbers.”

Earnings Season

Alcoa Inc. (AA:US) is the first Dow company scheduled to report quarterly results on July 9, and analysts forecast the largest U.S. aluminum maker will post an 82 percent drop in per-share profit. Analysts project a 1.8 percent decline in profits for S&P 500 (SPX) companies in the April-June period, which would mark the first year-over-year decrease since 2009.

Concern about a global economic slowdown put the S&P 500 last month on the brink of a so-called correction, or a 10 percent decline from a recent peak. The index slumped 3.3 percent in the second quarter, the biggest retreat since the period ending in September.

The Morgan Stanley Cyclical Index (CYC) of companies most-tied to economic growth slumped 0.5 percent for the week. DuPont Co., the most valuable U.S. chemical company, sank 3.3 percent to $48.90, while GE retreated 4 percent to $20. Industrial companies in the S&P 500 fell 1.4 percent for the biggest drop among 10 industries.

Banks Tumble

Financial stocks fell the second-most, losing 1.2 percent as a group. JPMorgan slumped 5.1 percent, the second-biggest decline in the Dow, to $33.90. The lender was ordered by a federal judge to explain why it shouldn’t be compelled to turn over e-mails sought by U.S. regulators in a probe of potential energy-market manipulation. Bank of America slid 6.4 percent to $7.66 for the biggest retreat in the 116-year-old stock gauge.

A group of six health insurers in the S&P 500 fell 4.2 percent as a group, with WellPoint Inc. (WLP:US) sinking 6.1 percent to $59.91. The second-largest U.S. health-plan provider has erased about 14 percent in the six days since the Supreme Court’s decision to uphold President Barack Obama’s health-care reform. Minnetonka, Minnesota-based UnitedHealth Group Inc. (UNH:US), the biggest health insurer, declined 4.6 percent to $55.82 for the week.

Consumer staples companies had the biggest gain as a group, climbing 0.5 percent. Limited Brands Inc. and Ross Stores Inc. (ROST:US) led a rally in retailers after reporting June sales that topped estimates. Limited Brands, the parent company of Victoria’s Secret, jumped 7.7 percent to $45.82 and discounter Ross added 7.4 percent to $67.12. Wal-Mart Stores Inc. (WMT:US), the world’s largest retailer, rose 2.4 percent to $71.36 for the biggest gain in the Dow.

Netflix, GM

Netflix advanced the most in the S&P 500, rising 20 percent to $81.89. The largest video-subscription service’s estimated 24 million domestic subscribers probably watched an average of 40 hours of programming online last month, analyst Rich Greenfield of BTIG Research wrote in a July 3 report. He based his estimate on a posting by Chief Executive Officer Reed Hastings.

General Motors Co. (GM:US) jumped 3 percent to $20.31. The automaker said sales climbed 16 percent in June, beating the 7.6 percent increase that was the average estimate of 11 analysts surveyed by Bloomberg.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $60.31 USD
    • 0.32
    • 0.53%
  • BAC
    (Bank of America Corp)
    • $16.77 USD
    • 0.06
    • 0.36%
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