U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its biggest drop in a month, after European Central Bank President Mario Draghi failed to reassure investors on immediate efforts to bolster the economy.
Knight Capital (KCG:US) Group Inc. plunged 56 percent after saying losses from a trading breakdown are $440 million (KCG:US), more than some analysts had estimated, as it explores strategic and financial alternatives. Bristol-Myers Squibb Co. fell 7.7 percent after suspending a mid-stage trial of an experimental hepatitis C drug and as an executive was accused of insider trading. Abercrombie & Fitch Co. (ANF:US) tumbled 15 percent as the retailer cut its forecast.
About nine stocks declined for every four that rose on U.S. exchanges at 12:38 p.m. New York time. The S&P 500 retreated 1.4 percent to 1,356.58, dropping 2.1 percent in four days. The Dow Jones Industrial Average decreased 165.63 points, or 1.3 percent, to 12,805.43 today. Trading in S&P 500 companies was up 22 percent from the 30-day average at this time of day.
“It’s status quo,” said Hayes Miller, who helps oversee about $48 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc. He spoke on a phone interview. “I don’t know why people feel that authorities can come up with magic solutions. I don’t know that the magic bullet exists. There are limits to what the ECB can do.”
Stocks joined a global slump as Draghi signaled the ECB intends to join forces with governments to buy bonds in sufficient quantities to ease the region’s debt crisis, while conceding that Germany’s Bundesbank has reservations about the plan. ECB officials are working on the plan and details will be fleshed out in coming weeks, he said after keeping the benchmark interest rate on hold at 0.75 percent.
“Traders and investors who expected immediate action are, and should be, disappointed,” Carl Weinberg, founder and chief economist of High Frequency Economics, wrote in a note today. “Clearly, the action plan is still lacking details.”
Yesterday, the American central bank also failed to bolster investors’ confidence. The Fed’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing. The S&P 500 rose as much as 29 percent from its October 2011 low amid bets the central bank would add further economic stimulus.
Tomorrow’s jobs report may provide more direction toward the Fed’s next steps to ensure the recovery is not derailed. Payrolls increased by 100,000 after a 80,000 gain in June and the unemployment rate held at 8.2 percent, according a Bloomberg survey. Data today showed orders placed with U.S. factories unexpectedly declined and the number of Americans filing applications for unemployment benefits rose less than forecast.
In corporate news, investors watched the latest developments with Knight Capital. The shares plunged 56 percent to $3.07, extending a two-day plunge to 70 percent. Knight has “all hands on deck” and is in close contact with clients and counterparties as it tries to weather trading errors that cost it $440 million, Chief Executive Officer Thomas Joyce said.
Joyce said it’s “hard to comment” on discussions with creditors and the firm explored strategic and financial alternatives following a loss almost four times its annual profit. The problems were triggered by what Joyce called “a bug, but a large bug” in software as the company, one of the largest U.S. market makers, prepared to trade with a New York Stock Exchange program catering to individual investors.
“Technology breaks,” Joyce said in an interview on Bloomberg Television’s “Market Makers” program with Erik Schatzker and Stephanie Ruhle today. “It ain’t good. We don’t look forward to it.”
Bristol-Myers slumped 7.7 percent to $32.87. The company lost ground in the race to develop a stand-alone hepatitis C pill after it suspended testing of an experimental drug for the disease that cost it $2.5 billion to buy earlier this year.
Separately, Bristol’s executive Robert Ramnarine was charged with insider trading for buying stock options in three companies targeted for acquisition, according to a Federal Bureau of Investigation arrest complaint.
Investors also watched second-quarter corporate earnings. About 72 percent of companies which reported quarterly results have beaten analysts’ estimates, according to data compiled by Bloomberg. Sales missed estimates at 59 percent of companies.
Abercrombie & Fitch tumbled 15 percent to $28.75. The company, which got 20 percent of sales from Europe in the year ended Jan. 28, has lost revenue as the region is roiled by a sovereign-debt crisis and amid tepid consumer sentiment at home.
Apache Corp. (APA:US) dropped 5.6 percent to $82. The independent oil and natural-gas producer reported second-quarter profit that trailed analysts’ estimates after energy prices fell and maintenance hampered production.
DirecTV (DTV:US) slid 1.8 percent to $49.20. The largest U.S. satellite-television provider reported second-quarter profit (DTV:US) that trailed analysts’ estimates after posting the company’s first net decrease in U.S. subscribers.
Navistar International Corp. (NAV:US) declined 8.1 percent to $22.77. The maker of International brand trucks disclosed a U.S. Securities and Exchange Commission inquiry and withdrew its full-year earnings forecast.
Facebook Inc. (FB:US) dropped 3.7 percent to $20.10, a record low. The world’s largest social-networking service last week reported earnings that showed slowing growth.
Halozyme Therapeutics Inc. (HALO:US) tumbled 51 percent to $4.17 after an immune deficiency treatment it developed with Baxter International Inc. was rejected by U.S. regulators who also halted a separate clinical trial involving Halozyme’s part of the combination therapy.
Gap Inc. (GPS:US) and Macy’s Inc. (M:US) posted July same-store sales that topped analysts’ estimates as promotions and warm weather boosted shopping traffic. Gap, the biggest U.S. specialty- apparel retailer, climbed 9.4 percent to $32.19. Macy’s, the owner of its namesake and Bloomingdale’s department stores, added 2.6 percent to $35.97.
First Solar Inc. (FSLR:US) surged 27 percent to $18.73. The world’s biggest maker of thin-film panels said profit jumped 81 percent after it recognized revenue for selling power plants, validating a strategic shift to building solar farms using its modules.
Time Warner Cable Inc. added 1.9 percent to $87.18. The second-largest U.S. cable-television provider reported second- quarter profit that beat (TWC:US) analysts’ estimates after gaining broadband Internet subscribers.
Green Mountain Coffee Roasters Inc. (GMCR:US) rallied 32 percent to $23.59. The maker of Keurig brewers and single-serve pods said third-quarter profit rose 30 percent and it will repurchase as much as $500 million in shares over the next two years.
Yelp Inc. (YELP:US) added 19 percent to $22.42. The online review website reported second-quarter sales that topped estimates as an expansion into new regions helped widen its user base.
Berkshire Hathaway Inc. (A:US) is benefiting after billionaire Chairman Warren Buffett increased investments tied to the U.S. housing market and sidestepped bets on Europe amid the region’s debt crisis.
Berkshire’s Class A shares rose (2FA:US) this week to the highest in 16 months. The Omaha, Nebraska-based company, which is expected to report second-quarter earnings tomorrow, is about 3 percent away from the top closing price since 2008.
Buffett added to holdings (2FA:US) of Wells Fargo & Co., the largest U.S. home lender, bought real-estate brokers and bid on mortgage assets of bankrupt Residential Capital LLC as he bets on a rebound in housing in the world’s largest economy. Rather than spend his company’s cash pile on European companies after a 2008 trip to the region, he made his largest acquisitions (2FA:US) in the U.S., including Fort Worth, Texas-based railroad Burlington Northern Santa Fe.
“I don’t know if he’s lucky, smart or patriotic, but it’s worked out for him,” Cliff Gallant, an analyst at KBW Inc., said in a phone interview. He estimates that Berkshire will post an operating profit (2FA:US) of $1,750 a share for the second quarter, a 6.7 percent increase from a year earlier.
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