Bloomberg News

U.S. Stocks Fall as Economy Concern Offsets Energy Gains

July 16, 2012

U.S. stocks fell, dragging the Standard & Poor’s 500 Index lower for the seventh time in eight days, after the International Monetary Fund cut its global economic forecast and retail sales unexpectedly dropped.

JPMorgan Chase & Co. (JPM:US) lost 2.7 percent while Home Depot Inc. and Caterpillar Inc. (CAT:US) dropped more than 1 percent to lead the Dow Jones Industrial Average lower. Equities pared losses as energy companies rose with the price of oil while Visa (V:US) Inc. and MasterCard (MA:US) Inc., the world’s biggest payment networks, gained at least 1.7 percent after agreeing to a settlement of at least $6.05 billion in a price-fixing case.

The S&P 500 declined 0.2 percent to 1,353.64 at 4 p.m. New York time after earlier retreating as much as 0.6 percent. The Dow slipped 49.88 points, or 0.4 percent, to 12,727.21 today.

“The retail sales gives you another indicator that uncertainty has showed up in the consumer side,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We’re in a bit of the summer doldrums.”

The S&P 500 is down 4.6 percent from a four-year high in April as economic data trails forecasts and investors brace for what is projected to be the first decrease in quarterly earnings since 2009. The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 64, near the almost 11-month low of minus 64.9 reached last week.

Retail Sales

U.S. retail sales dropped 0.5 percent in June, following a 0.2 percent decrease in May, Commerce Department figures showed today. The decline was worse than the most-pessimistic forecast in a Bloomberg News survey in which the median projection called for 0.2 percent rise.

The IMF cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.

Manufacturing in the New York region expanded in July at a faster pace than anticipated, signaling factories will keep contributing to growth. The Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg News called for an increase to 4.0. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Earnings Season

Earnings beat estimates at 21 of the 32 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg show. Profits probably decreased 2.1 percent in the second quarter, the first drop in almost three years, according to a Bloomberg survey of analysts.

JPMorgan Chase, the largest U.S. bank by assets, fell 2.7 percent to $35.09 after rallying 6 percent on July 13 as Chief Executive Officer Jamie Dimon predicted the company will still post record earnings this year despite a $4.4 billion trading loss in the second quarter.

The bank’s assertion that traders at its London chief investment office may have intentionally mismarked trades, masking losses that total at least $5.8 billion, makes little sense, according to former executives with direct knowledge of the unit’s operation.

Home Depot, the nation’s largest home-improvement retailer, slumped 1.2 percent to $51.45. Caterpillar, the world’s biggest maker of construction equipment, declined 1.1 percent to $81.15.

General Electric Co. lost 0.9 percent to $19.59, helping send industrial shares down 0.6 percent as a group for the biggest drop among 10 industries in the S&P 500. Morgan Stanley reduced its recommendation on the world’s biggest maker of jet engines, power generation equipment and locomotives to equalweight from overweight, citing the stock’s higher valuation relative to peers with or without GE Capital Corp.

Coal Stocks

Alpha Natural Resources Inc. (ANR:US) declined 10 percent to $6.85 as Bank of Montreal cut its rating to underperform from outperform, citing potential financing issues. Arch Coal Inc. (ACI:US), the fourth-largest U.S. producer of the fuel, sank 3.9 percent to $5.90 after BMO cut the stock to underperform from market perform.

Energy stocks added 0.3 percent after earlier falling as much as 0.8 percent as the price of crude oil reversed earlier declines to rise 1.5 percent to $88.43 a barrel. Chevron Corp., the second-largest U.S. energy company, climbed 0.7 percent to $106.78. Denbury Resources Inc., the oil and natural-gas producer, rallied 3.8 percent to $14.77.

MasterCard advanced 1.7 percent to $436.89 and Visa rose 2.5 percent to $127.15 after they agreed to settle a price- fixing case brought by retailers over credit-card swipe fees.

Citigroup, Gannett

Citigroup Inc. (C:US), the third-biggest U.S. bank, advanced 0.6 percent to $26.81 after reporting second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds.

Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.

Gannett Co., the owner of 82 daily newspapers including USA Today, rallied 2.7 percent to $14.69. The company reported second-quarter profit that topped analysts’ estimates, bolstered by growing Internet revenue. Excluding some items, profit was 56 cents a share in the period, beating the 53-cent average estimate by analysts, according to data compiled by Bloomberg.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $62.48 USD
    • 0.00
    • 0.0%
  • CAT
    (Caterpillar Inc)
    • $93.72 USD
    • 0.22
    • 0.23%
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