Most U.S. Stocks Fall as Financial Slump Offsets China

By Rita Nazareth - Jun 8, 2012 4:30 AM GMT+0700

Most U.S. stocks declined as a late- day slump in financial and technology shares erased an advance driven by China’s first interest-rate cut since 2008.

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June 7 (Bloomberg) -- Bloomberg's Ellen Braitman reports on the performance of the U.S. equity market today. Most U.S. stocks declined as a late-day slump in financial and technology shares erased an advance driven by China’s first interest-rate cut since 2008. (Source: Bloomberg)

The Standard & Poor’s 500 Index began paring a rally in the morning as Federal Reserve Chairman Ben S. Bernanke said the central bank will assess the economy before deciding if more stimulus is needed. The measure erased gains in the final hour of trading after a report that Greece’s upcoming election could be derailed. Bank of America Corp. (BAC) and Hewlett-Packard Co. (HPQ) dropped at least 1.3 percent. Newmont Mining Corp. (NEM) slumped 2 percent as gold tumbled amid reduced bets on Fed action.

About seven stocks retreated for every five rising on U.S. exchanges at 4 p.m. New York time. More than 7.2 billion shares changed hands, or 6.3 percent above the three-month average. The S&P 500 declined less than 0.1 percent to 1,314.99, after rallying as much as 1.1 percent earlier today. The Dow Jones Industrial Average advanced 46.17 points, or 0.4 percent, at 12,460.96, after gaining as much as 140.47 points.

“It’s disappointing that the markets were not able to sustain the momentum established by the Chinese action,” said Peter Jankovskis, who helps manage about $2.8 billion at Oakbrook Investments in Lisle, Illinois. “Bernanke’s comments weren’t indicative of a Fed that will take aggressive action in the near future. There’s also concern about the upcoming Greek election. We’ll have to wait and see how all that plays out.”

Earlier gains in equities were driven by optimism that the Chinese rate cut could prompt global policy action. Stocks pared gains as Bernanke said further rounds of stimulus could boost the economy, yet may have “diminishing returns.”

‘Christmas Gifts’

“Sometimes investors look for their Christmas gifts in June,” said Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “China’s action helps to calm some of the fears. Yet Bernanke is throwing some cold water on expectations for QE3,” or a third round of asset purchases to stimulate growth. “We’d need to see a lot more deterioration in the economy before that happens.”

The S&P 500 reversed gains as the Associated Press reported that a municipal strike threatens to derail a June 17 Greek election that could determine the nation’s future in the euro.

Concern about a worsening of Europe’s debt crisis and a global slowdown took the S&P 500 down as much as 9.9 percent from this year’s peak in April. The index started the week trading at 12.9 times reported earnings, according to data compiled by Bloomberg, the cheapest valuation in six months. A three day rally through yesterday erased the loss driven by a disappointing jobs report on June 1.

Technology, Financial

Technology and financial shares, the biggest groups in the S&P 500, retreated. Bank of America slumped 2.9 percent, the most in the Dow, to $7.42. Hewlett-Packard, the largest personal-computer maker, dropped 1.3 percent to $22.06. Newmont Mining lost 2 percent to $50.69.

Best Buy Co. (BBY) fell 1 percent to $19.70. Founder and Chairman Richard Schulze resigned from the board sooner than planned and will explore options for his 20.1 percent ownership stake in the electronics retailer.

Facebook Inc. (FB) dropped 1.9 percent to $26.31, after rallying 3.6 percent yesterday. Earlier this week, the largest social- networking company fell to the lowest price since its initial public offering last month.

Nasdaq OMX Group Inc.’s backlog of IPO’s hasn’t suffered as a result of its mishandling of Facebook’s debut, Chief Executive Officer Robert Greifeld said. Nasdaq OMX’s computer systems used to establish the opening price for Facebook were overwhelmed on May 18 by order cancellations and updates for the IPO.

‘Nothing’ Changed

“Our IPO backlog is stable,” he said today during a Bloomberg Television interview. “Since May 18, nothing has changed. We’ve actually added a few companies.”

Pall Corp. (PLL) retreated 4.3 percent to $52.29. The maker of filtration and separation products posted third-quarter earnings that lagged behind analysts’ estimates.

Lululemon Athletica Inc. (LULU) dropped 8.8 percent to $63.84. The Vancouver-based yoga-wear retailer projected full-year earnings and sales that trailed analysts’ estimates.

Navistar International Corp. (NAV) tumbled 14 percent to $24.11. The company reported a surprise loss, lowered its forecast for a second time this year and reassigned top managers as it works to develop an engine that meets 2010 emission standards.

Industrial shares in the S&P 500 gained. United Technologies Corp. (UTX), a jet engine maker, advanced 2.4 percent to $75.40. Boeing Co. (BA), the world’s largest aerospace company, rallied 1.4 percent to $69.95.

Baidu, Apple

Baidu Inc. (BIDU), which handles about 80 percent of China’s Internet search queries, jumped 2.8 percent to $122.46. Apple Inc. plans to add the company’s search engine on iPhones in China, part of a push to broaden its services and user base in the most-populous nation, according to two people with knowledge of the matter.

Regions Financial Corp. (RF) climbed 2.4 percent to $6.09. The Birmingham, Alabama-based bank was raised to outperform at Macquarie Group Ltd. The 12-month share-price estimate is $7.

CACI International Inc. (CACI) surged 10 percent to $49.50 after the government technology contractor forecast 2013 profit that was higher than analysts’ estimates.

A five-month low reached last week by the S&P 500 produced a pattern similar to one at last year’s low, indicating equities may be poised to rebound. While the benchmark measure sank June 1 to the lowest level since January, its 14-day relative strength index, which measures the degree to which gains and losses outpace each other, reached 28.5, staying above a low of 23.2 reached on May 18, according to data compiled by Bloomberg.

Last year, the S&P 500 dipped on Oct. 3 to a level not seen since September 2010, with the RSI holding above its August low. The index then surged by 29 percent over the next six months.

“This divergence highlights that sellers are losing momentum and control,” Joshua Dollinger, chief quantitative and technical strategist at BTIG LLC in New York, wrote in an e- mail. The “signals certainly make a compelling case to be long” over the next six weeks, he said.

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