S&P 500 Poised for First Weekly Drop Since Sept.

By Rita Nazareth - Nov 4, 2011 11:44 PM GMT+0700

U.S. stocks fell, sending the Standard & Poor’s 500 Index toward its first weekly drop since September, as concern about European financing offset an unexpected decrease in the American unemployment rate.

All 10 groups in the S&P 500 slid as financial and industrial shares had the biggest losses. Bank of America Corp. (BAC) tumbled 4.8 percent as a plan to bolster its balance sheet renewed concern that shareholders may see their stakes diluted. American International Group Inc. (AIG) slumped 4.3 percent after the bailed-out insurer posted its biggest loss since 2009. Groupon Inc. advanced 45 percent in its initial day of trading.

The S&P 500 sank 1.3 percent to 1,245.08 as of 12:40 p.m. New York time. The benchmark gauge for American equities was down 3.1 percent this week. The Dow Jones Industrial Average slumped 150.15 points, or 1.3 percent, to 11,894.32 today.

“Today’s jobs report does little to alleviate concern,” Mohamed A. El-Erian, the chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in an e-mail. His firm runs the biggest bond fund. “Initial indications suggest that G-20 leaders are having difficulties agreeing on the relatively easy items on their agenda. This bodes badly for the more difficult issues that also need coordinated measures on the part of the G-20.”

Global stocks slumped as the Group of 20 nations failed to agree on increasing the resources of the International Monetary Fund, dashing the hopes of European governments keen to tap more foreign aid. In the U.S., the unemployment rate fell to a six- month low of 9 percent from 9.1 percent, even as the labor force expanded. The 80,000 increase in payrolls followed gains in the prior two months that were revised up by 102,000.

‘Bottom Line’

“The bottom line is we’re making progress on the jobs front, but not enough to offset concerns about Europe,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a telephone interview. “The jobs report was reasonably good, especially when you throw in the revisions. Still, Europe is a story that doesn’t go away.”

The S&P 500 rose for a second day yesterday as Greece moved closer to accepting a bailout and the European Central Bank unexpectedly lowered interest rates. Earlier this week, a two- day slump sent the S&P 500 to the level where three rallies stopped in August and September, the top of a price range that prevailed for 10 weeks. The index rose above that level last week amid progress on Europe’s bailout plans.

American banks slumped, following a tumble in European lenders. The KBW Bank Index dropped 2 percent as all its 24 companies declined.

Improve Capital Levels

Bank of America retreated 4.8 percent to $6.58. The bank said it may exchange preferred securities for a total of $6 billion of common shares and debt, a plan that could cut interest and dividend costs and improve capital levels. The firm may issue 400 million shares and $3 billion of senior notes, according to a regulatory filing, taking advantage of lower prices for the bank’s existing securities.

“It looks like this will be dilutive to shareholders, but that’s the minor issue,” Richard Bove, an analyst with Rochdale Securities LLC in Lutz, Florida, said in a telephone interview. “The major issue is they said they wouldn’t issue stock, and this may be one too many statements to investors that didn’t turn out true.”

AIG sank 4.3 percent to $23.56. The quarterly loss casts doubt on the insurer’s ability to benefit from more than $25 billion in assets that can be used to lower future tax bills. The company posted a $4.11 billion third-quarter loss that wiped out profit from the first six months of the year.

Transportation Stocks

Concern about the pace of global growth sent the Morgan Stanley Cyclical Index down 1.2 percent. The Dow Jones Transportation Average lost 1.6 percent. FedEx Corp. (FDX), operator of the world’s biggest cargo airline, retreated 1.7 percent to $80.98. General Electric Co. (GE) decreased 2.5 percent to $16.26.

The Citigroup Economic Surprise Index for the U.S., which measures the rate at which data is beating or trailing economists’ forecasts, is at 18.7, the highest since April. The index has rebounded from minus 117.2 on June 3, when it showed economic data was trailing estimates by the most since January 2009.

Groupon, trading under the symbol GRPN, soared 45 percent to $28.91. It surged as much as 56 percent earlier. The company sold 35 million shares at $20 each, the largest initial public offering by a U.S. Internet company since Google Inc. raised $1.9 billion in its 2004 initial offering.

LinkedIn Tumbles

LinkedIn Corp. tumbled 8 percent to $80.52 as spending on research and development drove the professional-networking website to a loss. The company, which first sold shares to the public in May, is increasing spending on research, sales and marketing, and office expansions to boost the company’s global presence and attract more recent college graduates to the site.

Genworth Financial Inc. (GNW) surged 18 percent, the most in the S&P 500, to $7.27. The company said it will sell a stake in its Australian mortgage-guaranty business next year and may buy back stock. As much as 40 percent of the Australian unit may be sold in an IPO set for the second quarter of 2012, the Richmond, Virginia-based company said late yesterday.

Starbucks Corp. (SBUX) rallied 7.5 percent to $44.51. The world’s largest coffee-shop operator said fourth-quarter profit rose 29 percent as U.S. sales increased. Chief Executive Officer Howard Schultz has sought to boost sales by selling Via instant coffee that customers can brew at home.

McGraw-Hill Cos., CME Group and News Corp.’s Dow Jones agreed to join their index businesses, bringing the Standard & Poor’s 500 Index and Dow Jones Industrial Average under common ownership. McGraw-Hill, the New York-based finance and publishing company that’s splitting in two, will own 73 percent of the business. Chicago-based CME, the world’s second-largest exchange operator by market value, will control 24.4 percent and News Corp. will have the rest, the companies said.

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