Bloomberg News

U.S. Stocks Fall as Apple Slump Offsets Europe Optimism

August 21, 2012

S&P 500 Tops Highest Closing Level in 4 Years on Europe Optimism

Traders work on the floor of the New York Stock Exchange on August 20, 2012. Photographer: Spencer Platt/Getty Images

U.S. stocks fell, after the Standard & Poor’s 500 Index failed to remain above a four-year high, as a slump in technology shares overshadowed optimism euro-area leaders will make progress in resolving the region’s crisis.

Equities erased gains as Apple Inc. (AAPL:US) tumbled 1.4 percent after setting a record for U.S. market value yesterday, dragging down technology companies as a group. Verizon Communications Inc. (VZ:US) lost 1.9 percent, pacing declines among telephone stocks. Dell Inc. (DELL:US) sank 2.8 percent in late trading as it reduced its full-year profit outlook.

The S&P 500 lost 0.4 percent to 1,413.17 at 4 p.m. in New York. The benchmark index for American equities earlier traded above a four-year high of 1,419.04 reached on April 2. The Dow Jones Industrial Average fell 68.06 points, or 0.5 percent, to 13,203.58, after climbing above its highest close since 2007. Volume for exchange-listed stocks in the U.S. was 5.7 billion shares, 9.2 percent below the three-month average.

“Tech’s seeing weakness across the board,” Peter Sorrentino, a money manager at Huntington Asset Advisors in Cincinnati who helps oversee $14.7 billion of assets, said today by telephone. “With Apple, you’ve got a case where we have the back-to-school season and what does that look like for their product release.” He said, “Year-to-date, tech’s also up the most, so if you’re going to see profit-taking anywhere, you’d likely see it there.”

The S&P 500 has climbed 12 percent this year, with technology and financial stocks posting the biggest gains. Investor optimism that global central banks will take actions to stimulate growth has pushed the gauge up from a five-month low since June 1. Trading volume and volatility have dropped this month as vacationing traders await policy clues from the Federal Reserve’s annual summit in Jackson Hole, Wyoming, beginning Aug. 30 and a European Central Bank meeting in September.

Earnings Growth

Economic reports that exceeded economists’ estimates and second-quarter earnings have also boosted stocks. The Citigroup Economic Surprise Index for the U.S., which tracks how much data is beating or missing estimates, rebounded to minus 15.3 after hitting a low of minus 65.3 in July. While earnings growth for S&P 500 companies in the second quarter was the weakest since 2009, about 72 percent posted profits that beat analysts’ projections, the 14th straight quarter earnings topped estimates.

Stocks worldwide rose earlier today on mounting speculation leaders will make progress on Greece’s debt crisis this week. Luxembourg Prime Minister Jean-Claude Juncker, head of the group of euro-area finance ministers, visits Athens tomorrow to listen to a request by Greek Prime Minister Antonis Samaras for a two- year extension to the country’s fiscal-adjustment program. French President Francois Hollande and German Chancellor Angela Merkel meet in Berlin on Aug. 23.

Greek Concessions

Concessions are possible for Greece so long as Samaras shows a willingness to meet the main targets set out in his country’s bailout program, a senior lawmaker with Chancellor Angela Merkel’s party said.

Tomorrow, the Fed will publish minutes of its two-day meeting that ended on Aug. 1. The central bank, which has pledged to keep its benchmark rate near zero through 2014, refrained from adding to the $2.3 trillion in asset purchases it has already made to support the economy. The next Federal Open Market Committee gathering is on Sept. 12-13.

Fed Bank of Atlanta President Dennis Lockhart said U.S. policy makers face a risk of easing too much while trying to spur a “disappointing” three-year-old economic recovery. “There is a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved only by fiscal reform,” Lockhart said today in a speech in Atlanta.

Apple Sinks

The S&P 500 pared gains after earlier rallying as much as 0.6 percent. Apple, the world’s most valuable company, sank 1.4 percent to $656.06, sending technology stocks as a group lower. Technology hardware companies had the second-biggest decline out of 24 groups in the S&P 500, erasing 0.9 percent.

The iPad and iPhone maker’s market value yesterday reached $623.5 billion, overtaking Microsoft Corp.’s $616.3 billion market capitalization on Dec. 27, 1999, according to data compiled by S&P Dow Jones Indices LLC. Oracle Investment Research’s Laurence Balter lowered his rating on Apple’s stock to hold from buy, citing the stock’s recent rally signaling high expectations coupled with decelerating sales and earnings growth.

Facebook Falls

Facebook Inc. (FB:US) lost 4.3 percent to $19.16. Peter Thiel sold most of his stake in the operator of the world’s largest social- networking website, bringing his proceeds to more than $1 billion, after restrictions on insider sales ended. Thiel, a venture capitalist and hedge-fund manager who was one of the earliest investors in the company, sold about 20.1 million shares in the company on Aug. 16 and Aug. 17, according to a filing yesterday with the U.S. Securities and Exchange Commission.

Groupon Inc., the Chicago-based operator of a daily-deal website, fell 2.4 percent to $4.54. The shares have plunged 40 percent over six days to reach a record low. Barclays Plc cut its rating for the shares to underweight and lowered the price estimate to $4 from $15. Like Facebook, Groupon is one of several Internet stocks to come under pressure after the lifting of lock-up periods.

“This issue with Facebook is hanging over the whole technology sector,” Sorrentino said. “You get collateral damage. When people start to pull money, they don’t go after one single stock, they go after whole sectors. That sector’s caught in the downdraft today.”

Verizon Tumbles

Verizon tumbled 1.9 percent to $42.89 for the biggest decline in the Dow. Telecommunication companies posted the largest retreat out of 10 groups in the S&P 500, falling 1 percent.

Dell sank 2.8 percent to $12 at 5:04 p.m. New York time. After the close of regular trading, the Round Rock, Texas-based company reduced its forecast for earnings as its personal computer business dwindles amid a slow global economic recovery and competition from tablets.

Tech Data Corp. (TECD:US) erased 5.6 percent to $49.24. The distributor of computer products reported second-quarter earnings of 88 cents a share, missing the average analyst estimate of $1.17.

Best Buy Co. dropped 1.4 percent to $17.91. The consumer- electronics retailer shunning a takeover attempt by its founder yesterday named Hubert Joly as its new chief executive officer. Best Buy reported second-quarter profit that trailed analysts’ estimates and suspended earnings forecast as sales of computers and televisions dropped. The company also suspended share repurchases for the current fiscal year.

Urban Outfitters

Urban Outfitters Inc. (URBN:US) surged 18 percent to $36.98 for the largest gain in the S&P 500. The Philadelphia-based retailer said net income rose 8.1 percent to $61.3 million, or 42 cents a share, from $56.7 million, or 35 cents, a year earlier. Analysts’ average estimate called for 33 cents a share.

Financial stocks climbed 0.2 percent as the only group to advance out of 10 in the S&P 500. JPMorgan Chase & Co. (JPM:US) jumped 1.8 percent to $38.04 for the biggest gain in the Dow.

Freeport-McMoRan Copper & Gold Inc. (FCX:US) jumped 3.2 percent to $36.49. Allegheny Technologies Inc. (ATI:US), a producer of specialty materials, increased 2.3 percent to $33.35. Prices for metals including gold, copper and silver all rallied today.

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

  • AAPL
    (Apple Inc)
    • $524.75 USD
    • -6.95
    • -1.32%
  • VZ
    (Verizon Communications Inc)
    • $47.43 USD
    • -0.49
    • -1.03%
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