U.S. Stocks Retreat for a Fourth Week on European Debt Concern

May 28, 2011, 12:23 AM EDT By Nikolaj Gammeltoft

May 28 (Bloomberg) -- U.S. stocks fell a fourth straight week, the longest slump in 15 months, as concern Europe’s debt crisis is worsening overshadowed rallies by commodity producers and a Group of Eight forecast for faster economic growth.

The S&P 500 pared its loss yesterday, gaining 0.4 percent, after G-8 leaders said a strengthening economy will help nations cut debt. Utilities, health-care stocks and household-products makers fell the most among 10 industries in the index, losing 1 percent or more, as investors sold stocks least-dependent on economic growth. Fuel and metal producers gained the most, adding 2 percent. Luxury retailer Tiffany & Co. surged 10 percent after raising its profit forecast.

The S&P 500 fell 0.2 percent to 1,331.10 this week. It dropped throughout May after reaching an almost three-year high on April 29. The Dow Jones Industrial Average lost 70.46 points, or 0.6 percent, to 12,441.58 this week.

“The market is seesawing back and forth, trying to assess these spectacular risks which live on the front page of the news and weigh them against strong corporate profitability,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages about $161 billion.

The S&P 500 has retreated 2.4 percent this month, fueled by concern Greece is struggling to avoid default and weaker-than- forecast economic data, including a decline in U.S. housing starts. Before this week, the advance since the S&P 500’s 2011 low on March 16 was led by health-care stocks, followed by consumer companies that sell necessities, telephone networks and utilities, as investors sought havens. The trend reversed this week as commodity producers surged.

Debt Crisis

Stocks decreased on May 23, giving the S&P 500 its biggest drop in two months, amid concern that the economic rebound is slowing and Europe’s debt crisis is worsening. The Federal Reserve Bank of Chicago’s gauge of economic activity unexpectedly dropped below zero in April, meaning the national economy is experiencing below-trend growth.

In Europe, Spanish Prime Minister Jose Luis Rodriguez Zapatero’s Socialist party suffered its worst defeat in more than 30 years in local elections amid a backlash over austerity measures. Italy’s credit-rating outlook was revised to negative from stable by S&P on May 20. Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the International Monetary Fund may not release its portion of a 12 billion-euro ($17.2 billion) aid payment to Greece next month.

Utilities in the S&P 500 declined 1.7 percent, the most among 10 industries. PG&E Corp., a power company based in San Francisco, dropped 3.8 percent to $43.10. Integrys Energy Group Inc. slumped 3.2 percent to $51.97.

Medco, Hormel

Health-care shares in the S&P 500 slumped 1.2 percent, led by Medco Health Solutions Inc.’s 8.8 percent retreat to $58.66. CVS Caremark Corp. won a $3 billion contract to provide pharmacy benefits to federal employees, winning the deal away from Medco. Medtronic Inc. fell 4.5 percent to $40.31.

The so-called consumer staples group in the S&P 500 lost 1 percent. Hormel Foods Corp., which makes cold cuts and packaged foods, fell 3.5 percent to $29.03. Safeway Inc., a grocer, declined 2.7 percent to $24.52.

S&P 500 gains were led by raw-material and energy stocks, which advanced more than 2 percent. AK Steel Holding Corp. rallied 8.2 percent to $15.29. Freeport-McMoRan Copper & Gold Inc. increased 6.9 percent to $51.73. Exxon Mobil Corp. climbed 1.3 percent to $82.63.

Government Contracts

Computer Sciences Corp. sank 10 percent to $40.04. The provider of technology services to companies and U.S. government agencies gave a fiscal full-year forecast that missed analysts’ estimates. The company has been hurt by delays in federal contract decisions and is working to revise its contract with the U.K. government’s National Health Service.

American International Group Inc. sank 6.2 percent to $28.88. The Treasury sold 200 million shares at $29 each, compared with the most-recent closing price of $29.46. The government, which retains a majority stake, must sell shares at an average of about $28.73 to recover a $47.5 billion investment.

LinkedIn Corp. declined 5.1 percent to $88.32. The first major U.S. social-media company to go public more than doubled following its initial public offering last week, prompting investors such as Gamco Investors Inc.’s Lawrence Haverty to say the stock is overvalued.

The S&P 500 rose yesterday, finishing a three-day rally, after consumer sentiment increased to a three-month high in May and the Group of Eight leaders said that a strengthening global economy will pave the way to cuts in the debt built up during the recession that followed the 2008 financial crisis.

Europe vowed to fight its fiscal woes with “determination,” while President Barack Obama promised a “clear and credible” U.S. deficit-reduction strategy.

Tiffany rallied to its highest level since its May 1987 IPO, gaining 10 percent to $76.50 for the second-biggest increase in the S&P 500. The world’s second-largest luxury jewelry retailer raised its annual forecast as sales surged globally and recovered in earthquake-hit Japan.

--Editors: Nick Baker, Chris Nagi

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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U.S. Stocks Retreat as Gap’s Earnings Forecast Misses Estimates

May 20, 2011, 9:58 AM EDT By Rita Nazareth

May 20 (Bloomberg) -- U.S. stocks fell, trimming the first weekly gain for the Standard & Poor’s 500 Index in May, as Gap Inc.’s profit forecast missed estimates and the euro weakened on expectations that the German economy will lose momentum.

Gap tumbled 18 percent after the largest U.S. apparel chain cut its full-year profit forecast by 22 percent as costs to make clothes rose faster than expected. Aeropostale Inc. slumped 15 percent as its profit projection trailed analysts’ estimates. Barnes & Noble Inc. soared 30 percent as the bookstore chain received a takeover offer from John Malone’s Liberty Media Corp.

The S&P 500 fell 0.2 percent to 1,340.48 at 9:32 a.m. in New York. The benchmark gauge for American equities has risen 0.2 percent this week. The Dow Jones Industrial Average declined 24.18 points, or 0.2 percent, to 12,581.14 today.

“There’s concern that we’re sliding backward a bit,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, which manages $1.5 billion. “Some retailers missed earnings estimates and cited higher costs. We got some weak figures, including housing yesterday. We may see more data to contradict all that. For now, because of the lack of catalysts, the market will not have a real trend.”

The S&P 500 rose 6.8 percent in 2011 through yesterday amid higher-than estimated earnings and government stimulus measures. Profits at S&P 500 companies that have reported results since April 11 have expanded 20 percent, with 72 percent topping analysts’ estimates for per-share earnings, according to data compiled by Bloomberg.

Euro Weakens

The euro weakened, snapping a four-day gain versus the dollar, as the Bundesbank said Germany’s economy will probably lose growth momentum. Germany’s 1.5 percent growth rate in the first quarter “considerably overstates the underlying economic momentum,” the Frankfurt-based Bundesbank said.

Gap tumbled 18 percent to $19.20. Expenses per unit will rise 20 percent in the second half, outweighing price increases, Gap said. The apparel industry is facing cost inflation for the first time in two decades because of surging cotton prices and increased pay for workers who make clothes in China and other parts of Asia. Retailers have said they plan to raise prices to counter the higher costs.

“While we acknowledge that costing pressure is impacting our business, we’re working hard to navigate this short-term macro challenge to our profitability in the current fiscal year,” Chairman and Chief Executive Officer Glenn Murphy said in the statement.

Aeropostale Slumps

Aeropostale slumped 15 percent to $18.07. The teen- clothing retailer forecast second-quarter profit of no more than 16 cents a share, below the average analyst estimate of 27 cents a share.

Barnes & Noble soared 30 percent to $18.37. Liberty Media offered $17 a share, a 20 percent premium to yesterday’s closing price, Barnes & Noble said in a statement. A board committee will evaluate the proposal, which is subject to an accord and to shareholder and regulatory approvals.

Barnes & Noble, facing increasing competition as more consumers buy electronic readers such as Amazon.com Inc.’s Kindle, hired Lazard Ltd. last year to explore a sale. Barnes & Noble makes the Nook e-reader, and some potential bidders balked at a purchase because of how long it may take the chain to generate more digital sales, two people said last month.

Salesforce.com Inc. advanced 7.2 percent to $145.60. The largest supplier of customer-management software forecast fiscal second-quarter sales and profit that topped estimates as the company added clients.

--Editors: Michael Regan, Joanna Ossinger

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

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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U.S. Stocks Retreat as Housing, LEI Reports Temper Optimism

May 19, 2011, 1:25 PM EDT By Rita Nazareth

May 19 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index higher a second straight day, as initial jobless claims fell more than forecast and higher-than- estimated earnings bolstered optimism.

PetSmart Inc., a pet-store chain, and Dollar Tree Inc., a discount retailer, added at least 7.1 percent after reporting earnings that beat estimates. Intel Corp., KLA-Tencor Corp. and Applied Materials Inc. slumped more than 1.5 percent as Goldman Sachs Group Inc. cut their ratings, citing increased competition from tablet computers and excess supply.

The S&P 500 rose 0.1 percent to 1,342.38 at 1 p.m. in New York. The index yesterday posted the biggest gain in three weeks. The Dow Jones Industrial Average advanced 33.15 points, or 0.3 percent, to 12,593.33 today.

“The rally will accelerate,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which oversees $358.2 billion. “We had an excellent jobless claims number, which tells me that we’re going to see a solid jobs report. The Fed has indicated that it will be vigilant and watching the pace of jobs recovery. I don’t believe we’ll see a QE3. Still, we’ll continue with easy policy.”

The S&P 500 yesterday snapped a three-day drop amid higher- than-estimated earnings and as the Federal Reserve signaled continued low interest rates. The index rose 6.6 percent in 2011 through yesterday as profits at 72 percent of the 450 companies that reported results since April 11 beat the average analyst projection, according to data compiled by Bloomberg.

Jobless Claims

Stock futures extended gains before the open of regular trading as a government report showed that fewer Americans than forecast filed applications for unemployment benefits last week, making it more likely that the surge in April was caused by temporary events rather than a deterioration in the labor market.

Jobless claims declined by 29,000 to 409,000 in the week ended May 14, Labor Department figures showed today in Washington. The median estimate of economists in a Bloomberg News survey called for a drop to 420,000. The number of applications were the lowest in a month.

Stocks briefly turned lower after a report showed that sales of existing homes unexpectedly declined in April, indicating the industry is struggling to gain traction as the economy expands. Separate figures showed that manufacturing in the Philadelphia unexpectedly grew in May at the slowest pace in seven months, a sign the world’s largest economy may get less of a boost from the industry that led it out of the recession.

Earnings Season

PetSmart added 7.1 percent to $45.50. The pet-store chain said profit in the first-quarter was 61 cents a share, exceeding the average analyst estimate of 55 cents.

Dollar Tree gained 3.8 percent to $63.66. The discount retailer reported first-quarter profit of 82 cents a share. On average, the analysts surveyed by Bloomberg estimated earnings of 75 cents.

Intel slumped 1.8 percent to $23.45. Goldman Sachs lowered its rating on the world’s largest chipmaker, to “sell” from “neutral” yesterday. The bank said its analysis shows that processors out-shipped PCs by about 10 percent in the first quarter. It said Intel’s longer-term threat is from tablets such as Apple Inc.’s iPad, which run on ARM-based chips, eating into the PC market.

Chip Orders

Goldman Sachs downgraded KLA to “sell” from “neutral,” citing its vulnerability to weakness at Intel. Applied Materials was cut to “neutral” from “buy” because of lower 2012 capital spending by chip makers. The bank said orders for semiconductors are likely to decline in the next six quarters.

KLA dropped 4.1 percent to $41.08, while Applied Materials slid 1.5 percent to $14.28.

LinkedIn Corp., the first major U.S. social-media company to sell shares to the public, rallied 133 percent to $104.85 in its trading debut. The company raised $352.8 million in an initial public offering after pricing its shares at $45 each, at the top end of the range. At the IPO price, the company has a market value of $4.25 billion, or 11.3 times projected annual sales. That compares with 13.8 for Facebook Inc. and 8.3 for Salesforce.com Inc.

--Editors: Joanna Ossinger, Michael Regan

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

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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