U.S. Stocks Little Changed on Europe Concern

By Rita Nazareth - Dec 6, 2011 10:11 PM GMT+0700

U.S. stocks were little changed as concern the European Financial Stability Facility may lose its top credit rating tempered optimism about effort to tame the region’s credit crisis.

Darden Restaurants Inc. (DRI), operator of the Red Lobster and LongHorn Steakhouse chains, tumbled 9.4 percent after cutting its full-year sales and profit growth forecasts. 3M Co. (MMM) added 1.8 percent as revenue may increase as much as 6 percent next year amid a boost from acquisitions. General Electric Co. (GE) and LinkedIn Corp. advanced at least 1.7 percent after analysts raised their recommendations for the shares.

The S&P 500 fell less than 0.1 percent to 1,256.73 at 10:10 a.m. New York time. The benchmark gauge gained 1 percent yesterday even as S&P put 15 euro nations on review for possible downgrade. The Dow Jones Industrial Average added 23.80 points, or 0.2 percent, to 12,121.63.

"The European crisis is an on and off switch," Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $44 billion, said in a telephone interview. "While the market was not overly shocked by S&P announcements, they do create a sense of urgency for European leaders. The good news is that they are coming up with proposals, but that also raises questions on whether they will be in fact able to deal with them."

German Finance Minister Wolfgang Schaeuble said S&P’s warning will help force European leaders to ratchet up efforts to resolve the crisis. European Central Bank President Mario Draghi will probably cut the benchmark rate a quarter point when policy makers meet Dec. 8, according to 58 economists in a Bloomberg survey.

Top Credit Rating

Earlier today, stock futures trimmed gains after S&P said the European Financial Stability Facility may lose its top credit rating if any of its guarantors have their own debt grade lowered. Germany, France and four other nations may lose their AAA ratings depending on the result of a summit of European Union leaders this week, S&P said yesterday.

“If downgrades follow of all or some of the six remaining AAA-rated euro-zone countries, how will the EFSF keep a AAA rating?” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, wrote to clients before S&P’s announcement. “It likely won’t, and will it be an effective bailout tool with a subsequent higher cost of capital?”

Laszlo Birinyi says he knew it would be hard to make predictions for 2012 in October, when he saw a headline suggesting that markets would rise or fall depending on whether the tiny nation of Slovakia approved a bailout plan for Europe.

Birinyi, president of stock market research and money- management firm Birinyi Associates Inc., says markets are so volatile that it doesn’t take much to send them reeling, reports Bloomberg Markets magazine in its January issue.

“There are so many exogenous factors that to try to forecast the market with a degree of confidence is difficult,” Birinyi says.

The best strategy for stock investors, he says, is to stick with iconic brands, such as Apple Inc. (AAPL) or Ralph Lauren Corp. (RL), and with companies that offer “meaningful dividends” of at least 5 percent.

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