Stocks in U.S. Decline as Factory Orders Trail Economists’ Estimates

By Ksenia Galouchko and Nikolaj Gammeltoft - Jan 4, 2012 10:15 PM GMT+0700

U.S. stocks fell, after yesterday’s rally, as factory orders trailed economists’ estimates and concern grew that European banks may need to raise more capital amid the region’s sovereign debt crisis.

Bank of America Corp. (BAC) slumped 3.1 percent as financial shares dropped the most among 10 groups in the Standard & Poor’s 500 Index. Yahoo! Inc. lost 2 percent after appointing Scott Thompson of PayPal as chief executive officer. EBay Inc., which owns PayPal, tumbled 3.9 percent. TiVo Inc. (TIVO) rose 8.9 percent after settling a patent lawsuit over digital video recorders with AT&T Inc.

The S&P 500 slid 0.5 percent to 1,270.39 at 10:14 a.m. New York time. The Dow Jones Industrial Average declined 37.12 points, or 0.3 percent, to 12,360.26 today.

“For most of the manufacturing and industrial data we can expect to see some surprises like this going forward," Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4 billion in Raleigh, North Carolina, said in a phone interview. "The market weakness today is a little bit of a reaction to strong gains from yesterday. Our belief is that the U.S. economy continues along a steady recovery path."

The S&P 500 lost 0.04 point to 1,257.60 in 2011, the smallest annual change since 1947. The benchmark gauge for U.S. equities surged 14 percent from last year’s lowest level on Oct. 3 through Dec. 30 as better-than-estimated economic data fueled optimism the world’s largest economy can shrug off concern over Europe’s sovereign-debt crisis. Stocks rallied 1.6 percent yesterday, sending the Dow to the highest level since July, amid signs that manufacturing output is increasing from China to Australia and America.

U.S. equities extended losses as bookings for factory goods rose 1.8 percent after a revised 0.2 percent drop the prior month, data from the Commerce Department showed today in Washington. Economists in a Bloomberg survey had estimated a 2 percent increase, according to the median forecast.

UniCredit Share Sale

Global stocks fell earlier as UniCredit SpA, Italy’s largest bank, said it will sell new shares in a 7.5 billion-euro ($9.8 billion) offer to strengthen its capital position. The European Central Bank reported overnight deposits from financial institutions rose to an all-time high and Luxembourg Prime Minister Jean-Claude Juncker said the European Union is facing a recession of unknown scope.

Germany sold 10-year bonds today, getting more bids than the amount for sale and kicking off a competition for financing that may determine whether euro-area leaders can preserve the single currency.

Financial shares fell as European lenders tumbled. Bank of America dropped 3.1 percent to $5.62, for the biggest decline in the Dow. JPMorgan Chase & Co. (JPM) lost 1 percent to $34.38.

Yahoo dropped 2 percent to $15.96. The Internet company that is exploring strategic alternatives appointed Thompson chief executive officer, four months after firing Carol Bartz for failing to drive a turnaround. EBay slipped 3.9 percent to $30.12.

TiVo rallied 8.9 percent to $9.72. AT&T agreed to pay at least $215 million to settle the patent lawsuit. TiVo, a pioneer in the market for set-top boxes that can record a TV program and play it back at the same time, had lost customers to offerings from TV-service providers including AT&T. TiVo accused those companies of using its patented time-warp technology.

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net