By Rita Nazareth - Mar 12, 2012 9:34 PM GMT+0700
U.S. stocks were little changed, following a four-week gain in the Standard & Poor’s 500 Index, as investors weighed whether a Chinese slowdown will lead to an easing of monetary policy at the world’s second-largest economy.
Financial (S5FINL) and commodity shares led the losses in the S&P 500 among 10 industries. Chesapeake Energy Corp. (CHK) and Mosaic Co. dropped at least 1.5 percent. JPMorgan Chase & Co. (JPM) sank 1.8 percent to pace declines in banks as the cost of insuring against default on European sovereign bonds rose to the highest in eight weeks. Oracle Corp. (ORCL) slumped 2 percent after the software maker was cut at Jefferies Group Inc.
March 12 (Bloomberg) -- David Kostin, chief U.S. equity strategist at Goldman Sachs Group Inc., talks about the outlook for U.S. stocks, corporate earnings and investor sentiment. Kostin speaks with Erik Schatzker Bloomberg Television's "InsideTrack." (Source: Bloomberg)
March 12 (Bloomberg) -- Jonathan Golub, chief U.S. market strategist at UBS Securities LLC, talks about outlook for U.S. markets, financials and oil prices. Golub speaks with Erik Schatzker, Stephanie Ruhle and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
The S&P 500 fell 0.2 percent to 1,367.87 at 10:33 a.m. New York time. The benchmark index advanced 2.1 percent in the past four weeks. The Dow Jones Industrial Average rose 3.37 points, or less than 0.1 percent, to 12,925.39 today.
“China is a big question mark,” said Erick Maronak, chief investment officer of Victory Capital Management Inc. in New York. His firm oversees $28 billion. “What’s their true rate of growth and how much will they have to ease to get things back on track?” he said. “Europe is still going to be a huge work in progress for many years. Now that there’s some greater visibility on how the Greece situation is going to unfold, everyone starts looking at dominoes two and three.”
Global stocks fell today as China had the biggest trade deficit last month in at least 22 years, the weakest January- February factory-production gain since 2009, and retail sales were below the median economist estimate, government data showed March 9 and 10. The central bank said in a statement today it will maintain a prudent monetary policy while fine-tuning and taking preemptive measures as appropriate.
Commodities Slump
Energy and raw material shares retreated amid concern about slower demand from China. The S&P GSCI index of 24 commodities slid 1 percent. Chesapeake Energy dropped 1.7 percent to $24.14. Mosaic (MOS) fell 1.5 percent to $54.71.
Investors also watched the latest developments in Europe’s attempts to tame its debt crisis. Euro-area finance ministers gather in Brussels today to sign off on the 130 billion-euro ($170 billion) second rescue package for Greece. They’ll also focus on Spain’s budget-cutting efforts and Portugal’s aid program, underscoring their desire to prevent contagion.
Banks had the biggest decline among 24 industries in the S&P 500, dropping 1.3 percent. JPMorgan slumped 1.8 percent to $40.31. Morgan Stanley (MS) decreased 2.2 percent to $17.97. Wells Fargo & Co. (WFC) retreated 1.5 percent to $31.19.
The S&P 500 gained 9 percent this year through March 9 amid better-than-expected data about the U.S. economy and as companies exceeded analysts’ profit forecasts for a 12th straight quarter.
‘Greater Challenges’
Oracle fell 2 percent to $29.53. The world’s second-largest software maker was cut to hold from buy at Jefferies Group Inc., citing “greater challenges” to its engineered systems strategy.
Michael Kors Holdings Ltd. fell 3.5 percent to $47.86. The luxury-goods maker and retailer named for the designer who founded it filed for a secondary offering of 25 million shares.
Walt Disney Co. (DIS) increased 0.7 percent to $42.54. The largest U.S. entertainment company by market value was raised to buy from neutral at Janney Montgomery Scott.
Transportation and industrial shares are diverging in the U.S., a signal that equity investors are starting to agree with what the bond market already knows: this economic recovery will remain sluggish for months to come.
Technology Bubble
The Dow Jones Transportation Average has fallen 3.9 percent from its six-month high on Feb. 3, while the Dow Jones Industrial Average (INDU) added 0.5 percent. The gauge of 20 shipping companies from FedEx Corp. to United Continental Holdings Inc. (UAL) peaked before the rest of the market when the technology bubble popped in 2000 and began slipping into a bear market three months before broader benchmark indexes in 2007.
While Laszlo Birinyi, the founder of Birinyi Associates Inc., says falling transport stocks don’t signal an end to the three-year bull market that doubled the S&P 500, money managers at Robert W. Baird & Co. and Legg Mason Inc. say the 25 percent rise in the index since October may have gone too fast.
Transport stocks are falling as 10-year Treasury yields stay near 2 percent, with economists forecasting the slowest post-recession recovery since World War II.
“In a healthy market, everything is going in the same direction,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird, which oversees $85 billion. “When that starts to diverge, that raises a flag that potential trouble may be brewing.”
Most Expensive
Monster Beverage Corp. (MNST)’s escalating profit from energy drinks pumped full of caffeine and nitrous oxide may tempt acquirers to chase what would be the most expensive takeover in the industry’s history.
After the stock more than doubled in the last year, Monster Beverage is valued at 20 times earnings before interest, taxes, depreciation and amortization, the priciest multiple of any North American soft-drink maker greater than $500 million, according to data compiled by Bloomberg that includes net debt. The $10.4 billion company, which got its start selling juices in the 1930s, has the highest operating margins in the industry and is projected to boost earnings 70 percent in the next three years, analysts’ estimates compiled by Bloomberg show.
“What Monster’s so successfully done in the last few years is proven that demand for energy drinks is fairly universal among young people,” Caroline Levy, a beverage and household products analyst for Credit Agricole Securities USA Inc. in New York, said in a telephone interview. “This business is now too big to ignore. If you’re a player in soft drinks, I think it’s very hard not to be in the highest-margin, highest-growth category out there.”
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
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