Consumer Sentiment in U.S. Increases More Than Forecast

December 09, 2011, 12:07 PM EST By Bob Willis

Dec. 9 (Bloomberg) -- Confidence among U.S. consumers rose more than forecast in December as Americans’ outlooks improved.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 67.7, a six-month high, from 64.1 at the end of November. The median estimate of 73 economists surveyed by Bloomberg News called for a reading of 65.8. The gauge averaged 89 in the five years leading up to the recession that began in December 2007 and ended in June 2009.

Falling gasoline prices, a drop in unemployment and a rebound in stocks may be helping boost confidence, raising the odds that the pickup in household spending will continue into 2012. Nonetheless, gridlock over deficit-cutting measures in Washington and concern that a European nation will default represent roadblocks to additional gains in sentiment.

“There has been a disconnect from the almost recessionary sentiment readings and reasonably good spending numbers, and something had to give,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who projected sentiment would rise to 68. “Spending has held in there and consumers’ negative attitudes have improved. Consumers started the holiday season strong and it looks like they will end it decently.”

Stocks rose after the report, adding to earlier gains as European leaders agreed to boost a rescue fund and tighten budget rules to stem the region’s debt crisis. The Standard & Poor’s 500 Index climbed 1.5 percent to 1,252.71 at 11:29 a.m. in New York. Treasury securities fell, pushing the yield on the benchmark 10-year note up to 2.02 percent from 1.97 percent late yesterday.

Germany, France

German exports fell in October and French industrial output stagnated, adding to signs that the euro region may slide into recession as leaders struggle to solve the sovereign debt crisis, reports showed today.

German sales overseas dropped 3.6 percent from September, the Federal Statistics office in Wiesbaden said, almost three times economists’ median forecast for a 1.3 percent decline. In France, industrial production was flat in October after falling 2.1 percent a month earlier, more than the initial 1.7 percent estimate, Paris-based statistics office Insee said.

In Asia, China’s inflation reached a 14-month low and industrial production rose less than forecast, bolstering the case for more stimulus measures to shore up growth in the world’s second-largest economy. Consumer prices increased 4.2 percent from a year earlier, the statistics bureau said on its website. Output gained 12.4 percent, the smallest increase since August 2009.

Survey Results

Estimates for U.S. consumer sentiment in the Bloomberg survey ranged from 63 to 68. The index averaged 64.2 during the 18-month recession.

Another report today showed the trade deficit narrowed in October to the lowest level of the year, reflecting a drop in imports that will help give the economy a lift. The gap shrank 1.6 percent to $43.5 billion, smaller than projected, from $44.2 billion in September, according to data from the Commerce Department.

The Michigan survey’s index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, climbed to 61.1 from 55.4.

The index of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, increased to 77.9 from 77.6 the prior month.

Inflation Outlook

Consumers in today’s confidence report said they expect an inflation rate of 3.1 percent over the next 12 months, down from 3.2 percent in November.

Over the next five years, the range tracked by Federal Reserve policy makers, Americans expect a 2.7 percent rate of inflation, the same as the prior month.

The Michigan index compares with the Bloomberg Consumer Comfort Index which was minus 50.3 in the week ended Dec. 4, down from minus 50.2 a week earlier. The measure has been at minus 50 or less for 11 of the past 12 weeks, a performance unprecedented in its 26-year history.

A gallon of regular unleaded gasoline fell to $3.27 on Dec. 5, its lowest since February, according to AAA, the nation’s largest automobile association. The unemployment rate in November fell to 8.6 percent, its lowest in more than two years, while the Standard & Poor’s 500 Index gained 6.5 percent from Nov. 25 through yesterday on signs Europe would avoid a default.

Early holiday season sales, which traditionally begin the day after Thanksgiving, provided a mixed picture. Limited Brands Inc. and Macy’s Inc. posted November same-store sales that topped analysts’ estimates as Thanksgiving weekend deals drew record crowds, while stores that missed out on the shopping blitz trailed expectations.

Holiday Excitement

“What you saw on Black Friday is people were excited early,” Saks Inc. Chief Executive Officer Steve Sadove said in a Bloomberg Television interview Dec. 1. Saks posted a 9.1 percent increase in November sales from a year earlier.

Kohl’s Corp. reported sales that declined 6.2 percent. Monthly sales for the Menomonee Falls, Wisconsin-based company were “disappointing,” Chief Executive Officer Kevin Mansell said in a statement.

Ahead of the holiday shopping season, consumers were limiting their expenditures. Household spending slowed to a 0.1 percent gain in October, the smallest since a 0.2 percent drop in June, according to Commerce Department data.

President Barack Obama and congressional leaders are trying to put together a package of year-end tax and spending provisions that can be enacted, including an extension of the payroll tax cut and jobless benefits.

A final deal may not emerge until next, because the U.S. House of Representatives won’t vote on its plan until then.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Kevin Costelloe

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net;

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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U.S. Stocks Fall a Third Week on Europe Concern, Forecast Cuts

May 21, 2011, 12:45 AM EDT By Whitney Kisling

May 21 (Bloomberg) -- U.S. stocks declined for a third straight week, the longest slump since August, as investors grew more concerned that Greece will default on its debt and reduced earnings forecasts undermined confidence in the economy.

Staples Inc. and Gap Inc. led losses in the Standard & Poor’s 500 Index after cutting their profit projections, while Hewlett-Packard Co. plunged 11 percent as it reduced its sales forecast. NYSE Euronext sank 13 percent after Nasdaq OMX Group Inc. said it was dropping a takeover bid for the operator of the New York Stock Exchange. Newfield Exploration Co. and El Paso Corp. led energy stocks to the biggest gain among 10 groups.

The S&P 500 lost 0.3 percent to 1,333.27 this week. The index has fallen every week in May after reaching an almost three-year high at the end of April. The Dow Jones Industrial Average fell 83.71 points, or 0.7 percent, to 12,512.04.

“People are realizing that not only the U.S. but the global economy still faces some issues,” said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. “You’ve still got problems particularly in Greece that aren’t going to go away soon. The market had gotten a little ahead of itself.”

While the S&P 500 is up 6 percent so far in 2011, the benchmark index for U.S. equities has lost 2.2 percent this month. The S&P 500 has only fallen one month so far this year, slipping 0.1 percent in March amid concern that Japan’s earthquake and tsunami would curb global demand.

Staples Plunges

Staples slipped the most in the S&P 500, losing 19 percent $16.37. The office-supply retailer forecast 2011 earnings wouldn’t exceed analysts’ average estimate, according to data compiled by Bloomberg.

Gap, the largest U.S. apparel chain, dropped 17 percent to $19.22 and had the worst daily decline in almost a decade yesterday. The company cut its full-year profit forecast by 22 percent as costs to make clothes rose faster than expected.

NYSE Euronext plunged as smaller competitors Nasdaq OMX and IntercontinentalExchange Inc. withdrew their bid for the New York-based company after the U.S. Department of Justice threatened a lawsuit. The shares lost 13 percent to $35.76.

S&P 500 technology companies slid the most among 10 groups this week, dropping 1.5 percent for the third straight week of losses. Hewlett-Packard, the biggest personal-computer maker, fell the most among technology shares after it cut a billion dollars from its sales forecast for 2011 and missed analysts’ profit projections. The shares slid 11 percent to $35.98.

Chip-Share Downgrade

KLA-Tencor Corp. lost 7.3 percent to $41.20. The semiconductor company, along with Intel Corp. and Applied Materials Inc., was downgraded by Goldman Sachs Group Inc., which cited increased competition from tablet computers and excess supply.

Energy shares in the S&P 500 rose 0.9 percent as a group this week, after losing 8.3 percent in the first two weeks of May. Oil climbed above $100 a barrel on May 18 after an Energy Department report showed an unexpected drop in U.S. inventories as refineries bolstered operating rates and imports declined.

Crude gained again on May 20 after the American Petroleum Institute said fuel consumption increased in April.

Newfield Exploration, an oil and gas producer which operates in the Gulf of Mexico, onshore U.S., Malaysia and China, advanced 6.9 percent. El Paso, which operates natural-gas pipelines, rose 6.4 percent.

Salesforce Rallies

Salesforce.com Inc., the largest supplier of customer- management software, advanced 8.7 percent to $146.61 for the best weekly gain since November. The company, which sells cloud- computing applications that companies rent over the Web rather than install on their computers, forecast fiscal second-quarter sales and profit that topped estimates as the company added 5,400 customers in last quarter.

The S&P 500 started the week lower on May 16 as concern about Europe’s debt crisis was heightened after Greece sought additional bailout funds. European finance chiefs endorsed a 78 billion-euro ($111 billion) bailout for Portugal. Authorities stepped up the pressure on Greece to sell assets and deepen spending cuts to win an increase of its 110 billion-euro aid package and more time to repay the loans.

“Some degree of caution might be in order in the near- term, while we wait for greater clarity on a series of risks in the weeks ahead,” said David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., which oversees $693 billion in assets. “Recent evidence suggests a bit of softness in the U.S. economy.”

Economic Signals

While a government report showed that fewer Americans than estimated filed applications for unemployment benefits during the previous week, other data showed manufacturing in the New York and Philadelphia regions expanded at a slower-than-forecast pace. Housing starts and existing home sales also unexpectedly decreased.

The S&P 500 was poised to gain for the week after the Federal Reserve signaled continued low interest rates on May 18. Talks about an exit strategy from the record stimulus measures don’t mean monetary tightening “would necessarily begin soon,” according to the Fed’s April policy meeting records, released last week. Gap’s forecast and Fitch’s downgrade of Greece brought the index lower for the week yesterday.

The S&P 500 has climbed 27 percent since Fed Chairman Ben S. Bernanke signaled in August that he would buy more bonds to stimulate the economy. The Fed’s second program of quantitative easing, or QE2, which was officially announced in November, ends in June.

Joy said the approaching end of the Fed’s quantitative easing “raises uncertainty” about its role in the S&P 500’s direction.

--With assistance from Nikolaj Gammeltoft in New York. Editors: Michael Regan, Stephen Kleege

To contact the reporter on this story: Whitney Kisling in New York at wkisling@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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