U.S. Stocks Fluctuate on Credit Ratings, GDP

By Rita Nazareth - Nov 22, 2011 10:15 PM GMT+0700

U.S. stocks fell, dragging the Standard & Poor’s 500 Index to its longest slump in almost four months, as data showed the economy grew less than previously estimated and concern about Europe’s debt crisis intensified.

Hewlett-Packard Co. (HPQ) lost 4 percent after forecasting profit that missed estimates. Netflix Inc. sank 3.2 percent as the video-streaming and DVD subscription service agreed to sell $400 million in stock and convertible notes.

The S&P 500 fell for a fifth straight day, slipping 0.2 percent to 1,190.39 at 10:14 a.m. New York time. The benchmark gauge for American equities fell 5.2 percent in four days through yesterday. The Dow Jones Industrial Average retreated 45.18 points, or 0.4 percent, to 11,502.13 today.

Yesterday’s 1.9 percent drop in the S&P 500 pushed the index below levels (SPX) representing the top of a price range that prevailed in the two months after the U.S. was stripped of its AAA credit rating by S&P on Aug. 5. Rallies after the downgrade brought the S&P 500 to closing highs of 1,204.49 on Aug. 15, 1,218.89 on Aug. 31 and 1,216.01 on Sept. 16, according to data compiled by Bloomberg.

The congressional supercommittee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weighing on the household spending that accounts for about 70 percent of the world’s largest economy.

Rating Companies

S&P reaffirmed it would keep the U.S. credit rating at AA+ after stripping the government of its top AAA grade on Aug. 5. Moody’s Investors Service reaffirmed its AAA rating with a negative outlook. Fitch Ratings noted in a statement that it said in August that a supercommittee failure would probably result in a “negative rating action,” likely a revision of its outlook to negative, and that a review would be concluded by the end of this month.

Stock-futures fell as the Commerce Department said gross domestic product rose at a 2 percent annual rate from July through September, less than projected and down from a prior estimate of 2.5 percent. The median forecast of 81 economists surveyed by Bloomberg News called for no revision. Fed officials are divided over whether additional steps are needed to lower borrowing costs. Minutes of their Nov. 1-2 meeting, to be released today, may shed more light on their discussions.

More Losses

The recent retreat in U.S. stocks, led by banks and brokerages, is signaling more losses through the end of the year, a period in which the S&P 500 usually performs best, according to Bank of America Corp. (BAC)

Financial shares have posted the worst return (SPXL1) this month among the S&P 500’s 10 industries, dropping 9.9 percent through yesterday. The weakness in the group and the benchmark gauge’s decline below 1,200 suggested the index is at risk of sinking to this year’s intraday low of 1,074.77, said Mary Ann Bartels, Bank of America’s head of U.S. technical and market analysis.

“A seasonal year-end rally will likely turn into a Christmas Bah, Humbug,” Bartels wrote in a note to clients yesterday. She sees a 50 percent chance of “a European meltdown” that would send the S&P 500 to as low as 935.

Hewlett-Packard fell 4 percent to $25.80. The profit outlook for this quarter and fiscal 2012 show that Chief Executive Officer Meg Whitman has a more realistic sense of the company’s challenges, said Chris Whitmore, an analyst at Deutsche Bank AG. Leo Apotheker was replaced on Sept. 22 after slashing forecasts three times in less than a year and jarring investors with a decision to explore spinning off the PC unit.

Netflix (NFLX) slumped 3.2 percent to $72.09. Technology Crossover Ventures will purchase $200 million in zero-coupon senior convertible notes due 2018, and T. Rowe Price (TROW) Associates Inc. funds will buy $200 million in stock, Los Gatos, California- based Netflix said yesterday in a statement.

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