U.S. Stocks Fall as Europe Threatens Growth

By Rita Nazareth - Jan 11, 2012 10:11 PM GMT+0700

‘Difficult’

Supervalu sank 10 percent to $7.52. Chief Executive Officer Craig Herkert said the company was working to keep prices low amid the “difficult economic environment and pressured consumer.” Supervalu said sales in its fiscal 2012 may be $36.1 billion. The average estimate of 13 analysts was $36.4 billion.

Investors may be about to turn toward government bonds and away from stocks and other riskier assets, according to Bob Janjuah, global head of tactical asset allocation at Nomura International Plc. This shift may begin by the end of the week, Janjuah wrote yesterday in a report. Yields on 10-year U.S., U.K. and German notes will be closer to 1.5 percent than 2 percent during the first quarter, he predicted.

The first quarter “is going to be extremely bearish for risk,” according to Janjuah, based in London. He cited the possibility that Greece may default on its debt before the quarter ends, along with other concerns.

Janjuah, who predicted last year’s second-half retreat in U.S. stocks, estimated that the S&P 500 may fall to 1,000 or lower this quarter. That would be a drop of at least 20 percent from last year’s close. Appetite for risk may return next quarter as the Federal Reserve and the Bank of England buy bonds in a so-called quantitative easing and the European Central Bank possibly does the same. After that, he expects a second-half slump that sends the S&P 500 tumbling to 800.

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