By Rita Nazareth - Dec 2, 2011 4:37 AM GMT+0700
Dec. 1 (Bloomberg) -- Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, discusses the potential impact of the European debt crisis on financial markets and investment strategy. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)
Dec. 1 (Bloomberg) -- Troy Gayeski, senior portfolio manager at SkyBridge Capital LLC, talks about the outlook for global markets and investment strategy. He speaks with Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
U.S. stocks declined as better-than- forecast manufacturing growth and a rally in French and Spanish bonds were not enough to extend the biggest three-day gain in the Standard & Poor’s 500 Index since March 2009.
Financial stocks (S5FINL) fell the most in the S&P 500 among 10 industries, dropping 1 percent, as Massachusetts sued some of the largest lenders over foreclosure practices. Alcoa (AA) Inc. lost 2.1 percent as commodities retreated. Kohl’s Corp. slumped 6.4 percent after November sales missed estimates. Yahoo! Inc. advanced 3.3 percent as a group including Alibaba Group Holding Ltd. was said to prepare a bid for the company.
The S&P 500 slid 0.2 percent to 1,244.58 at 4 p.m. New York time. The index rallied 4.3 percent yesterday as six central banks took action on Europe’s debt crisis by making it cheaper for lenders to borrow in dollars. The Dow Jones Industrial Average decreased 25.65 points, or 0.2 percent, to 12,020.03. Trading volume on U.S. exchanges dropped to about 6.8 billion shares, or 16 percent below the three-month average.
“Pressures on the financials are still out there,” Timothy Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group LLC in Bedford Hills, New York, said in a telephone interview. “The economic data was positive, but Europe is still a concern. The coordinated central bank action is not a solution. It buys them some time.”
Stocks rose earlier today as Spain and France sold 8.1 billion euros ($10.9 billion) of bonds, sending yields lower across Europe. In the U.S., manufacturing expanded in November at the fastest pace in five months.
Financial Shares
Equities reversed gains as JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) were among five banks sued by Massachusetts for allegedly conducting unlawful foreclosures and deceiving homeowners.
The KBW Bank Index (BKX) lost 0.8 percent after yesterday’s 7.2 percent jump. JPMorgan decreased 1.7 percent to $30.46. Citigroup slipped 1.8 percent to $26.99. Bank of America added 1.7 percent to $5.53, reversing an earlier decline.
Gauges of commodity shares in the S&P 500 fell at least 0.6 percent after a contraction in China’s manufacturing fueled concern Europe’s crisis is damaging the global economy as yesterday’s moves by central banks were viewed as only a temporary fix. Alcoa, the largest U.S. aluminum producer, dropped 2.1 percent to $9.81.
Kohl’s (KSS) fell the most in the S&P 500, erasing 6.4 percent to $50.37. The department-store chain said sales at stores open at least one year decreased 6.2 percent in November. Analysts on average estimated an increase of 2.1 percent.
Most Since August
Barnes & Noble Inc. (BKS) plunged 16 percent, the most since Aug. 19, to $14.59. The largest U.S. bookstore chain reported second- quarter sales that missed the average analyst estimate by 4.3 percent, according to Bloomberg data.
Stocks pared declines in the afternoon as investors awaited tomorrow’s jobs report. Payrolls may have climbed by 125,000 workers in November, after rising 80,000 the prior month, economists surveyed by Bloomberg projected ahead of the Labor Department report.
“People are looking for catalysts,” Peter Jankovskis, who helps manage about $2.4 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “One catalyst may be additional signs of strength in the U.S. You may have some people wanting to make sure that they are in because they are expecting a big number on the jobs front.”
Yahoo rallied 3.3 percent to $16.23. Alibaba Group and Softbank Corp. (9984) are in advanced talks with Blackstone Group LP (BX) and Bain Capital LLC about making a bid for all of Yahoo, said three people with knowledge of the matter.
Above $20
A bid may value Yahoo at more than $20 a share because of tax savings tied to the Internet company’s stakes in Alibaba and Yahoo Japan, said two of the people, who declined to be identified.
Clearwire Corp. (CLWR) rallied 14 percent to $2.03. The money- losing wireless carrier paid creditors $237 million in interest after striking a new network-sharing agreement with partner Sprint Nextel Corp. (S)
The S&P 500 will end next year at 1,250 as a stagnating U.S. economy damps valuation increases for equities, Goldman Sachs Group Inc.’s David Kostin said.
The strategist lifted his estimate for earnings by companies in the benchmark measure to $100 a share in 2012 from $98, according to a note dated yesterday. He boosted his projection for combined profit this year by $1 to $97.
Price-Earnings
The S&P 500 (SPX) declined 0.9 percent this year through yesterday amid concern European officials will fail to tame the region’s debt crisis, triggering a global recession. The gauge’s price-earnings multiple based on estimated profit for the next year has averaged 12.9 times this year and fell as low as 11 times on Oct. 3, according to data compiled by Bloomberg.
“The U.S. economy remains in stagnation,” Kostin said. “This fact will limit any significant rally or sustained P/E expansion in the S&P 500 in 2012. The high degree of political uncertainty coupled with downside policy tail risk drives our view that equity investors should focus on the underlying fundamentals and position portfolios for the worst while hoping for the best.”
To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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