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Monster Beverage Corp
Chesapeake Energy Corp
Cisco Systems Inc
Big Lots Inc
International Business Machines Corp
U.S. stocks declined, trimming the longest weekly advance since March for the Standard & Poor’s 500 Index, after a worse-than-expected Chinese trade report intensified concern that global economic growth is slowing.
Yahoo (YHOO)! Inc. slid 5.1 percent as Chief Executive Officer Marissa Mayer has embarked on a strategy that may end in a change in plans to return cash to shareholders. Monster Beverage Corp. (MNST) sank 8.6 percent as the company disclosed a probe by an unspecified attorney general. Chesapeake Energy Corp. (CHK) lost 2.7 percent as it received a subpoena from the antitrust office.
About seven stocks fell for every five rising on U.S. exchanges at 10:36 a.m. New York time. The S&P 500 lost 0.1 percent to 1,401.18, paring an earlier drop of as much as 0.5 percent. The index is still on pace for a fifth weekly gain. The Dow Jones Industrial Average slid 15.47 points, or 0.1 percent, to 13,149.72. Trading in S&P 500 companies was 13 percent below the 30-day average at this time of day.
“The market is looking at the worldwide slowdown,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees about $40 billion. “China is slowing down, Europe is in a recession. Everybody realizes that we’re on a tough situation. The question is -- can it get weaker or not?”
Equities joined a global decline in stocks after data showed that China’s export growth collapsed and imports and new yuan loans trailed estimates in July. Concern about Europe’s debt crisis also grew as French industrial output stagnated in June, the latest sign that the euro area’s second-largest economy may be heading for its first recession in three years.
Bets on global central bank action to stimulate the economy have driven the S&P 500 up almost 10 percent since June 1. The index rose for five straight days through yesterday amid better- than-estimated corporate profits and data on the jobs market. About 72 percent of the S&P 500 companies which reported second- quarter results so far have beaten earnings estimates, according to data compiled by Bloomberg.
David Bianco, Deutsche Bank AG’s chief U.S. equity strategist, cut his 2012 earnings estimate for S&P 500 companies, citing lower commodity prices, weak capital markets, a stronger dollar and a “midyear stall” in global manufacturing. His forecast was lowered to $102 a share from $105.
Eight out of 10 groups in the S&P 500 fell today as energy and consumer discretionary shares had the biggest losses. A measure of homebuilders in S&P indexes slid 1.3 percent.
Yahoo dropped 5.1 percent to $15.20. The review could mean that the company alters plans to return to shareholders the proceeds from the sale of Yahoo’s stake in Alibaba Group Holding Ltd., Sunnyvale, California-based Yahoo said.
Monster Beverage lost 8.6 percent to $55.92. The attorney general sent a subpoena in July, the Corona, California-based company said. The investigation, which is looking into the company’s flagship drink and ingredients as well as advertising, marketing and promotions, is in an early stage.
Chesapeake Energy slid 2.7 percent to $19.77. The subpoena from the antitrust division of the Justice Department’s Midwest Field Office comes amid an investigation into possible violations of antitrust laws related to the purchase of oil and gas rights, the Oklahoma City-based company said. The request calls for Chesapeake to provide certain documents to a grand jury in the Western District of Michigan, the company said.
Cisco Systems Inc. (CSCO) retreated 1.4 percent to $17.45. The outlook for the biggest maker of computer-networking equipment may be worse than estimated, said Ryan Hutchinson, an analyst at Lazard Capital Markets LLC.
Big Lots Inc. (BIG) dropped 4.3 percent to $39.55. The discount retailer was downgraded to underweight from neutral at JPMorgan Chase & Co. by equity analyst Matthew Boss. The 18-month share- price estimate is $34.
VeriSign Inc. (VRSN) slipped 0.7 percent to $46.29. The operator of computers that direct Internet traffic was downgraded to neutral from outperform at Robert W Baird & Co. by equity analyst Steven Ashley. The 12-month share-price estimate is $47.
J.C. Penney Co. rallied 6.7 percent to $23.57 after Chief Executive Officer Ron Johnson said his overhaul of the department-store chain is “on track” amid quarterly losses and plunging sales.
Research In Motion Ltd. (RIM) climbed 4.1 percent to $8.12. The company’s enterprise-services unit (RIMM) has attracted the interest of International Business Machines Corp. (IBM), according to two people familiar with the situation.
Economic indicators may need to change for the better by October in order for U.S. stocks to sustain this year’s gains, according to Myles Zyblock, chief institutional strategist at RBC Capital Markets.
Shares of companies most affected by the pace of economic growth have been out of favor for months, according to data tracking the ratio of Morgan Stanley indexes for cyclical and consumer-product shares since 2009, when a bull market began.
“We see one of two likely scenarios” unfolding for stocks, Zyblock wrote two days ago in a report. The first is that the economic gauges will rebound during the next month or two to confirm the gains in stocks. The second is that share prices will decline as the indicators fall further.
The cyclical-consumer ratio, cited in the Toronto-based strategist’s report, rose only 0.2 percent for the year through yesterday as the S&P 500 (SPX) gained 12 percent. The contrast became more pronounced in the past two months as the S&P 500 rebounded from its second-quarter low.
Rather than tracking the S&P 500, the cyclical-consumer ratio tended to move in lockstep with the Institute for Supply Management’s factory index, as the report showed. ISM readings for June and July were less than 50, pointing to a contraction in manufacturing.
Based on the backdrop, Zyblock wrote, higher stock prices can be attributed to “fast money investors who’ve been caught short, corporations with excess cash, and international equity investors running away from their home markets.”
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