Bloomberg News

U.S. Stocks Cap Worst Week Since June Amid Economy Woes

September 28, 2012

U.S. stocks fell, capping the biggest weekly slump since June for the Standard & Poor’s 500 Index, amid disappointing data at the world’s largest economy.

Equities pared losses as Spain’s stress tests showed that its banks have a capital deficit of 59.3 billion euros ($76.3 billion), less than previously estimated. McDonald’s Corp. (MCD:US), the world’s biggest restaurant chain, slid 1.6 percent after Janney Montgomery Scott LLC cut its recommendation on the shares. Nike Inc. (NKE:US), the largest sporting-goods company, dropped 1.1 percent after reporting future orders that trailed estimates.

The S&P 500 retreated 0.5 percent to 1,440.67 at 4 p.m. New York time, paring a loss of as much as 0.8 percent. The index dropped 1.3 percent this week. The Dow Jones Industrial Average decreased 48.84 points, or 0.4 percent, to 13,437.13 today. Volume for exchange-listed stocks in the U.S. was 6.4 billion shares, or 6 percent above the three-month average.

“We’re seeing data that are consistent with stall speed growth,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York. “It’s disappointing. We wanted to see acceleration. As for Europe, there’s always going to be anxiety. We’ve seen this movie before.”

Equities fell as data showed business activity unexpectedly contracted in September and consumer spending stalled in August after the surge in gasoline prices squeezed paychecks. Yet confidence among consumers climbed this month, indicating Americans became less pessimistic about the outlook for the world’s largest economy.

Stress Tests

Benchmark gauges pared losses after Spain released the results of a test designed to lift doubts about a financial industry hit by real estate losses. Spain commissioned the independent stress test as part of the conditions agreed in July for a European bailout of as much as 100 billion euros for its banking system, which has been saddled with more than 180 billion euros of losses linked to souring real estate assets.

“The focus is back on Europe,” said Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital in Greenwood, South Carolina. “It’s this ebb and flow of crisis-response-complacency. You get everything fine for a while and then increase in stress.”

Today’s decline trimmed this month’s gain in the S&P 500 to 2.4 percent and the benchmark’s quarterly advance to 5.8 percent. The index capped its fourth straight monthly rally. If history is any guide, October may be another month of gains for stocks. Over the last 20 years, the Dow has risen an average 1.8 percent in October, with positive returns 70 percent of the time, according to data compiled by Bespoke Investment Group.

Biggest Losses

Nine out of 10 groups in the S&P 500 (SPX) retreated today as phone, technology and commodity companies had the biggest losses. The Dow Jones Transportation Average, which is considered a proxy for economic growth, dropped 1 percent. Intel Corp. (INTC:US), the largest semiconductor maker, declined 1.9 percent to $22.66. Bank of America Corp. (BAC:US) slid 1.6 percent to $8.83.

McDonald’s dropped 1.6 percent to $91.75. Janney Montgomery Scott said September may be the slowest month for fast-food hamburger restaurants’ same-store sales this year. The firm downgraded the stock to neutral from buy. Yum! Brands Inc. (YUM:US), owner of the KFC and Taco Bell restaurant brands, dropped 1.9 percent to $66.34.

Nike slid 1.1 percent to $94.91. Chief Executive Officer Mark Parker has been discounting merchandise in China (FB:US) to clear inventory that wasn’t selling well, hurting demand for new products. Future orders from China, excluding currency fluctuations, declined 6 percent, trailing analysts’ average estimate for a 1.2 percent gain.

Apple’s Apology

Apple Inc. (AAPL:US) slumped 2.1 percent to $667.11. Chief Executive Officer Tim Cook apologized for the iPhone mapping software released last week that has been criticized for flaws such as misrouted directions and inaccurately located landmarks.

“We are extremely sorry for the frustration this has caused our customers and we are doing everything we can to make Maps better,” Cook said in a letter to customers posted today on the Cupertino, California-based company’s website.

Research In Motion Ltd. (RIMM:US) rallied 5 percent to $7.50. The company reported a narrower loss (RIMM:US) than analysts had projected, helped by the growth of BlackBerry subscribers in overseas markets such as India, South Africa and Indonesia.

U.S. shares of Accenture Plc (ACN:US) jumped 7.1 percent to $70.03. The world’s second-largest technology consulting company said earnings for the fiscal year ending in August will be $4.22 to $4.30 a share. Analysts estimated $4.13, on average.

IBM Gains

International Business Machines Corp., the biggest technology services provider, rose 0.8 percent to $207.45.

Facebook Inc. advanced 6.6 percent to $21.66 after researcher GlobalWebIndex said the social-networking site has seen an eightfold increase in users in China since that nation restricted access to the service in 2009.

Hartford Financial Services Group Inc. (HIG:US) advanced 0.7 percent to $19.44 as the firm agreed to sell (HIG:US) a life unit to Prudential Financial Inc. The insurer will get a statutory capital benefit of about $1.5 billion in the deal, more than the $1.1 billion expected by Randy Binner, an analyst at FBR Capital Markets.

Tesla Motors Inc. (TSLA:US), the electric-car maker led by Elon Musk, gained 2.8 percent to $29.28 after expanding a stock offering. The company said in a regulatory filing today that it expects to sell 6.93 million additional shares at $28.25 each, an increase of 2.58 million from what it reported in a Sept. 25 filing. The earlier filing didn’t list a price.

Dendreon Corp. (DNDN:US) increased 3.9 percent to $4.81. The maker of the prostate cancer drug Provenge gained after insurer Aetna Inc. said it will cover more patients to receive the therapy.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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


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Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $96.25 USD
    • -0.75
    • -0.78%
  • NKE
    (NIKE Inc)
    • $97.28 USD
    • -0.01
    • -0.01%
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