Bloomberg News

U.S. Stocks Fall as Industrial Shares Lead Drop on China

March 10, 2014

U.S. stocks slid, pulling the Standard & Poor’s 500 Index down from a record, as a slowdown in Chinese exports fueled concern about global economic growth.

Boeing Co. dropped 1.3 percent after a 777-200 plane disappeared with 239 passengers and crew during a Malaysia Airlines flight to Beijing on March 8. Chiquita Brands International Inc., owner of the namesake banana label, soared 11 percent after agreeing to buy Fyffes Plc. Industrials in the S&P 500 lost 0.5 percent as Joy Global Inc. and ADT Corp. fell at least 2.5 percent.

The S&P 500 declined less than 0.1 percent to 1,877.17 at 4 p.m. in New York, paring a drop of as much as 0.6 percent. The benchmark gauge is up 177 percent since reaching its bear-market low, which was five years ago yesterday. The Dow Jones Industrial Average slipped 34.04 points, or 0.2 percent, to 16,418.68 today. About 6 billion shares changed hands on U.S. exchanges, 10 percent lower than the three-month average.

“Chinese numbers gave the market an excuse to sell off,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by telephone from Sarasota, Florida. His firm oversees $120 billion. “The markets did well last week considering the news backdrop was potentially threatening with the Ukraine and weak economic numbers, obviously not including the labor report.”

China’s CSI 300 Index dropped to a five-year low after customs data on March 8 showed exports from China fell 18.1 percent in February from a year earlier. That was the largest decline since August 2009. The median estimate of analysts surveyed by Bloomberg had called for a 7.5 percent increase.

Crimean Peninsula

Russian forces advanced in Ukraine’s Crimean peninsula, ignoring Western calls to halt a military takeover before the region’s separatist referendum. The U.S. estimates Russia now has 20,000 troops confronting a smaller Ukrainian force there.

Ukrainian Prime Minister Arseniy Yatsenyuk said yesterday he’d travel to Washington this week as Russian President Vladimir Putin defended Crimea’s local government, which may use the March 16 vote to leave Ukraine and join the country’s Soviet-era master.

“The U.S. market started off poorly, but it made a nice recovery through the rest of the day,” Phil Orlando, who helps oversee just under $400 billion as chief equity market strategist at Federated Investors Inc., said by phone. “We saw with the jobs data on Friday that the numbers were stronger than anticipated. Now that the weather is getting better, investors are thinking there’s no reason to be dumping stocks right now.”

Volatility Index

Six of 10 main industries in the S&P 500 declined today, The Chicago Board Options Exchange Volatility Index (VIX), a gauge for U.S. stock volatility, rose 0.6 percent to 14.20.

Boeing lost 1.3 percent to $126.89. Malaysia still had no information about the Boeing aircraft. A team from the U.S. National Transportation Safety Board was heading to Malaysia to be in place once the wreckage of the plane is located. The team was being joined by experts from the Federal Aviation Administration and Boeing.

Joy Global fell 2.5 percent to $55.43 and ADT decreased 2.8 percent to $29.98.

Chiquita soared 11 percent to $12, the highest level since October. The company agreed to buy Fyffes in an all-stock transaction that values it at about $526 million. The deal will create a business with annual revenue of about $4.6 billion, according to a statement.

Cliffs Natural

Cliffs Natural Resources Inc. slipped 3.8 percent to $17.95, the weakest level since July. Axiom Capital Management initiated coverage with a sell rating on the Cleveland-based mining company. Axiom said that a possible bankruptcy is a “growing reality” due to Cliffs’s reliance on iron ore production. The firm forecasts that the average price of iron ore will decline by year-end.

3D Systems Corp. fell 5.1 percent to $63.90, while Stratasys Ltd. (SSYS:US) declined 1.8 percent to $112.41. Barron’s said 3D printer stocks look overvalued and that the two companies have “exorbitant” share prices, according to its March 10 issue. 3D Systems traded at almost 85 times its projected earnings, and Stratasys traded at a multiple of 52 as of the start of trading today, according to data (SSYS:US) compiled by Bloomberg.

Cablevision, Regado

Cablevision Systems Corp. dropped 1 percent to $17.97. Directors on the board of the fifth-largest U.S. cable company were sued by an investor for wrongfully approving “grossly excessive” compensation for Chairman Charles Dolan and members of his family who serve as Cablevision executives.

Regado Biosciences Inc. jumped 38 percent to a record $11.30 after announcing that the U.S. Food and Drug Administration has designated its REG1 anticoagulant drug for fast-track development.

Alexion Pharmaceuticals Inc. surged 7.1 percent to $180. Alexion said revenue this year will be higher, citing a reimbursement agreement for its drug Soliris.

FMC Corp. jumped 6.7 percent to record $83.10. The research company plans to create two independent public companies, separating its agriculture and healthcare units from other businesses including lithium and alkali chemicals. The transaction will be in the form of a tax-free distribution of shares to existing shareholders, FMC said.

The U.S. equity rally that just turned five years old is starting to match the 1990s Internet bubble when it comes to its speed. That’s where most of the resemblances end.

Unlike then, when technology stocks drew 85 percent of the cash and surged four times as much as anything else, investors today are spreading their money around, sending $2 billion or more to exchange-traded funds tracking everything from drugmakers to oil drillers, data compiled by Bloomberg and Morningstar Inc. show. While gains are extending to almost every industry, they’ve only been enough to push valuations to close to half the level when the bubble popped in 2000.

While the S&P 500’s multiple of 17 times reported earnings is close to the average since 1937, it’s about 40 percent below where it was in 2000, data compiled by Bloomberg and S&P show.

To contact the reporters on this story: Callie Bost in New York at cbost2@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

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


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