Bloomberg News

U.S. Stocks Fall Amid Europe Concern as Oracle Tumbles

March 21, 2013

U.S. Stocks Decline on Europe Economic Data, Cyprus Concerns

Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

U.S. stocks fell, after the Standard & Poor’s 500 Index approached a record high yesterday, as concern about Europe’s debt crisis overshadowed better-than- estimated American economic data.

Oracle Corp. (ORCL:US) plunged 9.7 percent after sales and earnings missed estimates. Cisco Systems Inc. and Juniper Networks Inc. slipped at least 2.2 percent amid an analyst downgrade. Guess? Inc. fell 7.2 percent after its revenue forecast trailed projections. Yahoo! Inc. (YHOO:US) added 3.5 percent as Oppenheimer & Co. upgraded the shares.

The S&P 500 fell 0.8 percent to 1,545.8 at 4 p.m. in New York, headed toward its second weekly decline of the year. The Dow Jones Industrial Average lost 90.24 points, or 0.6 percent, to 14,421.49. About 5.9 billion shares traded hands on U.S. exchanges today, 6.7 percent below the three-month average.

“There’s going to be on-again, off-again, troublesome news out of Europe and occasionally it’s going to cause the market some disruption,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $85 billion, said in a telephone interview. “The U.S. economy can do somewhat better, but it will probably be in a slow growth mode for most of 2013. That’s how it’s been over the last four years and the market has done quite well in that environment.”

Equities slid today as a purchasing managers’ index for Germany’s manufacturing industry unexpectedly fell this month while a measure of euro-area services and manufacturing output contracted more than forecast.

Cyprus Funding

The European Central Bank said it may cut Cypriot banks off from emergency funds after March 25 as the island nation’s president, Nicos Anastasiades, struggled to forge agreement on a plan to stave off financial collapse.

“We don’t feel anything has been solved in Europe in terms of the debt situation there,” Eric Thorne, who helps oversee about $6 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “Europe and the surrounding economies having trouble could well be the reason that the market decides to pause here for a while.”

In the U.S., sales of previously owned homes rose in February to the highest level in more than three years. Purchases increased 0.8 percent to a 4.98 million annualized rate, the most since November 2009, figures from the National Association of Realtors showed today in Washington.

Other data showed applications for jobless benefits increased by 2,000 to 336,000 in the week ended March 16, while the Conference Board’s gauge of the outlook for the next three to six months climbed 0.5 percent for the second straight month.

Record High

The S&P (SPX) 500 climbed yesterday to within seven points of its record reached in 2007 while the Dow hit an intraday all-time high as the Federal Reserve indicated it will keep up bond buying to stimulate the economy.

The bull market in U.S. equities entered its fifth year this month as the central bank embarked on three rounds of bond purchases to keep interest rates low and corporate profits beat analysts’ estimates.

Nine out of the 10 S&P 500 groups fell today as raw- materials and technology companies dropped the most, sinking at least 1.3 percent. The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, climbed 10 percent to 13.99. The gauge, known as the VIX, is down 22 percent this year and reached its lowest level since February 2007 last week.

Oracle led the slump in technology shares, tumbling 9.7 percent to $32.30. The largest database-software supplier reported sales and profit that missed analysts’ estimates as Chief Executive Officer Larry Ellison is being stymied by customers switching to Internet-based cloud systems, curbing their reliance on Oracle’s servers, databases and related programs.

Cisco Downgrade

Cisco declined 3.8 percent to $20.84 while Juniper Networks lost 2.2 percent to $18.89. The makers of networking equipment were cut to underperform, an equivalent of sell, from market perform at FBR Capital Markets. Increased competition means there will be a slow but “meaningful” reduction in the number of routers and switches deployed into networks, analyst Scott Thompson said in a note.

Jabil Circuit Inc. (JBL:US) retreated 4.5 percent to $18.60. The contract electronics manufacturer forecast earnings excluding some items of 58 cents a share at most for the fiscal third quarter. That trailed (JBL:US) the average analyst estimate of 61 cents in a Bloomberg survey.

Airgas Inc. dropped 5.2 percent to $97.96. The largest U.S. distributor of packaged gases said it may not meet its fiscal fourth-quarter earnings guidance after sales didn’t increase through February.

Guess slid 7.2 percent to $25.01. The maker of designer jeans forecast annual revenue of $2.6 billion to $2.64 billion, less than analysts’ estimates of $2.74 billion.

Yahoo Upgrade

Yahoo, the largest U.S. web portal, rose 3.5 percent to $22.86. The shares were upgraded to outperform, meaning investors should buy the shares, from market perform at Oppenheimer, which cited the value of Yahoo Japan shares and a possible initial public offering of Alibaba.com Ltd. in the next 12 months.

KB Home, the best-performing U.S. homebuilder stock this year, rallied 2.5 percent to $22.10, its highest level since September 2008. The Los Angeles-based company reported a narrower loss for its fiscal first quarter as sales and prices climbed amid a nationwide rebound in housing construction.

The S&P 500 is approaching a record almost 5 1/2 years after peaking and two years after most stocks in the gauge fully recovered from the worst bear market since the 1930s.

Rally Breadth

The index has climbed 130 percent since March 2009, adding $10 trillion to the value of American equity as it erased losses from the credit crisis. The majority of companies surpassed their previous highs by April 2011, according to data compiled by Bloomberg. The S&P 500 Equal Weighted Index, which counts each company in the index equally instead of by their market value, increased 192 percent from the bottom.

Unlike past bull markets, where a single industry dominated, all groups have improved in this rally as the U.S. economy recovers. The breadth of the rebound can be seen in the S&P 500’s weightings, where none of the 10 industry measures represents more than 18 percent of the index. In 2000, technology companies made up 35 percent of the gauge, and in 2006, financial stocks accounted for 22 percent.

“The breadth of this rally is rather remarkable,” Stephen Wood, who helps manage about $152 billion as the New York-based chief market strategist for North America at Russell Investments, said by telephone. “It speaks to the fact that four years ago the markets were pricing in the end of the world, but the end of the world was not nigh. So we’ve seen this significant but drawn-out recovery across the board in equities -- small, medium, large, defensive, dynamic, value, growth.”

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

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


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Companies Mentioned

  • ORCL
    (Oracle Corp)
    • $39.8 USD
    • -1.75
    • -4.4%
  • YHOO
    (Yahoo! Inc)
    • $40.93 USD
    • -1.16
    • -2.82%
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