Facebook’s Zuckerberg Meets Would-Be Investors in New York

By Brian Womack, Sarah Frier and Lee Spears - May 8, 2012 5:08 AM GMT+0700

Facebook Inc. (FB) Chief Executive Officer Mark Zuckerberg and other officials touted growth prospects for the largest social network in a meeting with hundreds of would- be investors ahead of its record initial public offering.

Investors watched a video featuring pitches by Zuckerberg, Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman, and then asked questions of the trio, said several people who attended today’s meeting at the Sheraton New York Hotel. The executives discussed their reasons for acquiring photo-sharing site Instagram and told investors they were optimistic about potential for future gains at Facebook.

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Mark Zuckerberg, chief executive officer and founder of Facebook Inc.. Photographer: David Paul Morris/Bloomberg

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May 7 (Bloomberg) -- Michael Pachter, a managing director at Wedbush Securities, talks about Facebook Inc.'s leadership and planned public stock offering. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Arvind Bhatia, an analyst at Sterne Agee & Leach Inc., talks about the outlook for Facebook Inc.'s initial public offering, the company and its shares. Facebook Chief Executive Officer Mark Zuckerberg is meeting would-be investors today as the largest social-networking service begins marketing its IPO, says a person with knowledge of the matter. Bhatia speaks with Betty Liu and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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May 4 (Bloomberg) -- Francis Gaskins, president of researcher IPOdesktop.com, talks about the outlook for Facebook Inc. He speaks with Emily Chang on Bloomberg Television's " Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Facebook Inc. Chief Executive Officer Mark Zuckerberg and other officials touted growth prospects for the largest social network in a meeting with hundreds of would-be investors ahead of its record initial public offering. Bloomberg's Jon Erlichman reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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May 7 (Bloomberg) -- Barton Biggs, managing partner and co-founder of Traxis Partners LP, talks about the outlook for the euro region and his investment strategy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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May 4 (Bloomberg) -- Alexis Ohanian, co-founder of Reddit.com, talks about the outlook for Facebook Inc.'s initial public offering. Ohanian speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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Mark Zuckerberg, founder and chief executive officer of Facebook Inc., leaves the Sheraton hotel in New York. Photographer: Scott Eells/Bloomberg

Facebook plans to raise as much as $11.8 billion in its IPO, the biggest ever for an Internet company. Zuckerberg, 27, has had to pitch his business model during Facebook’s years as a private company and probably won’t have trouble communicating the mission to prospective public investors, said Herman Leung, an analyst at Susquehanna International Group.

“It’s important to hear directly from him for investors who are about to put millions and millions of dollars into a company,” said Leung, who is based in San Francisco. “Convincing others now they should buy shouldn’t be that hard for a company that has amassed a user base of over 900 million.”

Investors’ Questions

Potential investors waited in a line that snaked through the hotel’s lobby and around the side of the building for a meeting that started about an hour late. CNBC televised footage of a hooded sweatshirt-clad Zuckerberg arriving at the hotel.

“The questions were all toward long-term elements of the business,” said Samuel Schwerin, managing partner at New York- based Millennium Technology Value Partners, which oversees $1 billion, including Facebook stock it bought in 2008. Schwerin attended the meeting today, and said he’ll add more shares in the IPO. “One of the things I was surprised by was the level of interest in the fundamental elements of how the company grows and how early it is in the value-creation story for Facebook.”

The video shown today had been posted online last week and many investors had already seen it. Facebook also has arranged meetings in Boston and Palo Alto, California, this week.

Executives addressed Facebook’s slowdown in revenue growth, saying the company is now facing a larger base of users and is working to be useful to them and advertisers, according to meeting attendees. Facebook is working on new ways to make money from mobile users, and on getting partners besides game maker Zynga Inc. to use its platform and currency, which is used to buy so-called virtual goods.

Instagram Deal

Zuckerberg told investors that the $1 billion Instagram acquisition, announced last month, was contemplated over a long period. He said he had watched the company grow for a while. He said opportunities like Instagram are unique, according to several meeting attendees.

The Menlo Park, California-based company is seeking a market value of as much as $96 billion. Facebook is offering 337.4 million shares at $28 to $35 each, and is scheduled to price the offering on May 17, data compiled by Bloomberg show. The shares will be listed on the Nasdaq Stock Market under the symbol FB. Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. (GS) are leading the sale.

Facebook is offering 180 million shares, while existing owners such as Accel Partners, Goldman Sachs and Digital Sky Technologies are offering 157.4 million shares. Zuckerberg is offering 30.2 million of his 533.8 million shares, and may control about 57 percent of the voting power of Facebook’s capital stock outstanding after the offering, the filing shows.

Attendance Required

“His attendance might demonstrate that the company processed the message that Mark’s absolute voting control makes his presence, at least at some of the larger meetings, much more important than would otherwise be the case,” Lise Buyer, principal at Class V Group in Portola Valley, California, said in an e-mailed statement. “The company’s job -- Mark, Sheryl, David together -- is to convince investors that Facebook’s brightest days are ahead and that therefore, there is significant room for an increase in the company’s value.”

Sandberg, who isn’t selling in the IPO, holds 1.9 million shares.

The initial share sale would eclipse the 2004 IPO of Google Inc. (GOOG), the world’s most valuable Internet company. Google’s offering, the same year Zuckerberg helped found Facebook, raised $1.9 billion and valued the company then at about $23 billion.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net

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Google’s Android Infringed Oracle’s Java, Jury Says

By Karen Gullo - May 8, 2012 5:03 AM GMT+0700

Oracle Corp. (ORCL) can’t seek $1 billion in damages from Google Inc. (GOOG) for infringing copyrights when it developed Android software running on more than 300 million mobile devices because a jury couldn’t agree on whether it was “fair use,” a federal judge said.

A jury in San Francisco today found that Google, the largest Web-search provider, infringed Oracle’s copyrights for programming tools and nine lines of code. U.S. District Judge William Alsup said at this point Oracle can only seek damages on the nine lines, which by law would be at most $150,000.

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The Android operating system trade stand at the Mobile World Congress in Barcelona. Photographer: Denis Doyle/Bloomberg

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May 7 (Bloomberg) -- Pat Walravens, managing director at JMP Securities LLC, talks about a jury's decision today in the first phase of a trial in Oracle Corp.'s intellectual-property lawsuit against Google Inc. The jury found that Google infringed Oracle's copyrights for programming tools in nine lines of codes. Walravens speaks with Emily Chang on Bloomberg Television's "Bloomberg West." Cory Johnson also speaks. (Source: Bloomberg)

“There has been zero finding of liability on copyright, the issue of fair use is still in play,” Alsup said about the 12-member jury’s decision on the programming tools. He ordered the patent phase of the case to begin; damages will be taken up by the jury in the last phase of the 8-week trial.

Anyone can use copyrighted work without consent of the owner if it advances the public interest by adding something new or functional. Google attorney Robert Van Nest asked Alsup to declare a mistrial, saying the issue of whether the company is liable for infringement is directly linked to the question of whether it was fair use. Alsup gave each side until May 10 to submit arguments on that issue and didn’t say when he would rule.

Mobile Devices

Oracle alleged that Google, based in Mountain View, California, stole copyrights and patents for the Java programming language when it developed the Android operating system for mobile devices, which were released in 2007. Oracle acquired Java when it bought Sun Microsystems Inc. in 2010.

Oracle, the largest maker of database software, is seeking damages as well as a court order preventing Google from distributing Android unless it pays for a license.

“Oracle, the nine million Java developers, and the entire Java community thank the jury for their verdict in this phase of the case,” Deborah Hellinger, an Oracle spokeswoman, said in an e-mail. “The overwhelming evidence demonstrated that Google knew it needed a license.

“Every major commercial enterprise -- except Google -- has a license for Java and maintains compatibility to run across all computing platforms,” she said.

Last Word

The jury’s findings may not be the last word on infringement. While the panel was asked to decide whether Google infringed parts of Java called application programming interfaces, or APIs, the ultimate decision on whether APIs are covered by copyrights will be made by Alsup later in the case. Alsup told the jury to assume APIs are copyrightable; he can decide later that they aren’t.

Alsup must also rule on Oracle’s request for a judgment in its favor that Google infringed Java copyrights and its copying wasn’t fair use. A ruling for Oracle could set aside the jury’s decision.

“We appreciate the jury’s efforts, and know that fair use and infringement are two sides of the same coin,” Google spokesman Jim Prosser said in an e-mail. “The core issue is whether the APIs here are copyrightable, and that’s for the court to decide. We expect to prevail on this issue and Oracle’s other claims.”

Seven Notes

The jury found today that Google didn’t infringe the documentation for the 37 APIs at issue. The panel also determined that Google infringed just 1 of 3 Java codes that were in dispute. In addition, jurors concluded that while Google proved that “Sun and/or Oracle” led the company to believe it didn’t need a license for the Java technology, Google didn’t show that it relied on that knowledge when it decided not to seek a license.

The verdict came on the fifth day of deliberations in the trial, which began April 16. The jury sent Alsup seven notes during its discussions with questions, including some about the meaning of “fair use.” A May 3 note said the panel couldn’t reach a unanimous decision. Alsup ordered jurors to continue deliberations, and after learning the panel was still at an impasse, ordered them to deliver a partial verdict.

Java is a free language. Oracle argued that the parts of Java that Google used are covered by copyrights and that the search engine company was required to pay for a license to use the technology.

Operating System

Google denied infringement, saying it developed Android from scratch and that the Java elements it used aren’t covered by copyrights. Any bits of copied Java in Android constituted fair use because Google gives Android away for free to programmers and it expanded the language’s usefulness by finding a way to build a smartphone operating system with Java, something Sun and Oracle were unable to do.

Oracle argued that the Java copying was for Google’s commercial benefit -- to increase use of Google’s search engine, which generates advertising revenue -- and added nothing new to Java.

The next phase of the case is about two Java patents Oracle alleges were infringed.

Google rose $10.58 to $607.55 in Nasdaq trading in New York. Oracle fell 49 cents to $27.92.

The case is Oracle v. Google, 10-3561, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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Hedge Funds Bet Wrong Before Biggest Slump Since October

By Elizabeth Campbell - May 8, 2012 3:24 AM GMT+0700

Hedge funds raised bets on higher commodity prices for the first time in six weeks, just before the biggest three-day slump since October as U.S. jobs data fell short of expectations and European manufacturing contracted.

Money managers increased net-long positions across 18 U.S. futures and options by 6.9 percent to 895,240 contracts in the week ended May 1, the biggest gain since Feb. 28, Commodity Futures Trading Commission data show. Bullish copper wagers surged sevenfold before prices fell for three days, and soybean bets reached the highest since at least June 2006 as the oilseed capped the biggest weekly loss since mid-January.

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Stockpiles of copper monitored by the London Metal Exchange tumbled 38 percent this year to the lowest level since October 2008. Photographer: Bartek Sadowski/Bloomberg

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May 7 (Bloomberg) -- Barry Knapp, head of equity strategy at Barclays Capital, talks about the outlook for U.S. markets. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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Chinese home prices fell to a 14-month low in April. Photographer: Qilai Shen/Bloomberg

The Standard & Poor’s GSCI Spot Index of 24 raw materials tumbled 4.9 percent in the three sessions ended May 4, the most since Oct. 4. Reports showed last week that services and manufacturing output shrank last month in the euro region and the U.S. added fewer jobs than forecast in April. Open interest, or contracts outstanding, across commodities fell 2 percent in the seven sessions through April 30, the longest slide since November, data compiled by Bloomberg show.

“We had some soft data points along the edges that’s taken some of the steam out of the market,” said Kelly Wiesbrock, who helps manage $1.3 billion of assets for San Francisco-based hedge fund Harvest Capital Strategies. “It’s hard to know whether this is a just a little bit of a pause, or if this is something bigger.”

Prices Slide

The S&P GSCI plunged 4.5 percent last week, the most since Dec. 16. The MSCI All-Country World Index of equities dropped 2.3 percent, and the dollar rose 1 percent against a basket of six major currencies. Treasuries returned 0.3 percent, a Bank of America Corp. index shows.

The GSCI extended its drop today, falling 0.2 percent to close at 652.27. The gauge capped a fourth straight decline, the longest slide since August.

Twenty-two of the raw materials tracked by the S&P GSCI declined last week. Gasoline plunged 7.2 percent, copper dropped 2.7 percent and soybeans fell 1 percent. On May 4, crude oil slumped below $100 a barrel for the first time since February.

Payrolls in the U.S. rose 115,000 in April, the smallest gain in six months, the Labor Department said May 4. That compared with the median estimate of 160,000 in a Bloomberg survey of 85 economists. Unemployment in the 17 countries that use the euro rose to a 15-year high and manufacturing contracted for a ninth month, reports from the European Union’s statistics office and Markit Economics on May 2 showed. European Central Bank President Mario Draghi said May 3 that the economic outlook has become “more uncertain.”

Chinese Homes

Chinese home prices fell to a 14-month low in April, SouFun Holdings Ltd. (SFUN), the nation’s biggest real-estate website owner, reported May 2. The country is the biggest buyer of everything from copper to cotton to soybeans.

The outlook for commodity markets is weaker as China’s growth slows, Europe’s debt crisis intensifies and because the Federal Reserve is less likely to purchase more debt to stimulate growth, ABN Amro Bank NV said in a report May 2. The S&P GSCI rose more than 80 percent from December 2008 to June 2011 as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing and held borrowing costs at a record low.

Soy Crops

Commodity prices may prove resilient as drought damages soybean crops in South America, copper inventories tumble and rains disrupt sugar supplies in Brazil, the biggest grower.

Sixteen of 24 analysts surveyed by Bloomberg expect soybeans to gain this week and one was neutral, the highest proportion since March 16. Prices reached $15.125 a bushel on May 2, the most since July 2008. Hedge funds lifted their wagers by 4.3 percent to 253,889 contracts, the CFTC data show.

Stockpiles of copper monitored by the London Metal Exchange tumbled 38 percent this year to the lowest level since October 2008. Jiangxi Copper Co. plans to ship metal to nearby LME warehouses to bring down prices, China’s largest producer of the metal said May 2.

“While there may be some slack from Europe, if the U.S. and emerging market economies continue to show signs of improvement, that will bode well for the commodity markets longer term,” said Nelson Louie, the global head of commodities at New York-based Credit Suisse Asset Management who helps manage $11 billion of assets.

Commodity Funds

Investors withdrew $357 million from commodity funds in the week ended May 2, according to data from Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Gold and precious-metals outflows totaled $349 million, Cameron Brandt, the director of research, said by phone.

Speculators raised bets on higher crude-oil prices by 12 percent to 219,817 contracts, the biggest gain since Feb. 14, the CFTC data show. Crude oil declined 6.1 percent in New York last week.

U.S. crude stockpiles increased 2.84 million barrels to 375.9 million in the seven days ended April 27, the most since September 1990, according to an Energy Department report May 2. Domestic output gained 8,000 barrels a day to 6.12 million, the highest level since November 1999.

Wagers on copper increased sevenfold to 15,582, as prices slumped 2.7 percent, the first weekly drop in three. Bullish gold bets climbed 7.9 percent to 116,061, a four-week high. Bullion slumped 1.2 percent in New York last week on speculation that the Fed will be reluctant to buy more debt to shore up growth, easing concern that inflation will accelerate.

Chicago Futures

A measure of net-longs for 11 U.S. farm goods rose 0.1 percent to 512,512 contracts, the CFTC said. Corn holdings climbed 9 percent to 112,328, the biggest increase since March 6. Futures in Chicago dropped 0.8 percent last week, leaving prices down 4.1 percent this year.

Global food costs fell for the first time this year in April, the United Nations’ Food & Agriculture Organization said on May 3, and prices are down 10 percent from the all-time high reached in February 2011.

“Agriculture and other energy type commodities will most likely be dragged down due to concerns on slow growth of the U.S. and negative growth in Europe,” said Stephen Hammers, the Nashville, Tennessee-based chief investment officer at Compass EMP Funds, which manages about $1 billion of assets. “News is not expected to be as bright as it was last quarter.”

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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No Repeating Slowdown Seen by U.S. With Banks to Housing

By Joshua Zumbrun - May 8, 2012 3:26 AM GMT+0700

The smallest gain in U.S. payrolls in six months need not presage the kind of slowdown that bedeviled the world’s largest economy for the past two years.

Rising auto sales, improving bank credit and stabilization of housing are among the signs the economy is more resilient now than it was around the same time in 2010 and 2011, according to Marisa Di Natale, an economist at Moody’s Analytics in West Chester, Pennsylvania.

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Allen Zimney and his girlfriend Leila Alvarez shop for a Ford Edge at the Star Ford dealership on March 23, 2012 in Glendale, California. Photographer: Kevork Djansezian/Getty Images

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May 7 (Bloomberg) -- Michelle Meyer, a senior economist at Bank of America Merrill Lynch, talks about the U.S. economy and real estate market. She speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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May 7 (Bloomberg) -- Barry Knapp, head of equity strategy at Barclays Capital, talks about the outlook for U.S. markets. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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The average price of regular gasoline fell to $3.80 a gallon on May 3 from a 2012 high of $3.94 on April 4. Photographer: Daniel Acker/Bloomberg

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Consumer spending rose at a 2.9 percent pace in the first quarter, the fastest in more than a year. Photographer: David Paul Morris/Bloomberg

“From where we sit right now, we think the economy looks fundamentally stronger,” Di Natale said. “Surveys of business and consumer confidence are better, the labor market data looks a lot better than it did last year, even some of the housing data looks better.”

Stocks and bond yields fell on May 4 after a report showing payrolls climbed 115,000 in April, less than the 160,000 median forecast in a Bloomberg News survey of 85 economists. The slowdown followed data showing the pace of economic expansion cooled in the first quarter, prompting concerns that another pickup in growth may again be sputtering.

In 2011, the economy was rocked by repeated shocks. Oil prices soared as a result of political upheaval in the Middle East, a tsunami and earthquake in Japan disrupted manufacturing supply chains, Europe’s debt woes deepened and U.S. lawmakers struggled to reach an accord to raise the debt ceiling.

Payroll growth slowed to an average monthly pace of 80,000 in the period from May through August 2011, from 207,000 in the first four months of the year.

Tax Credit

The expiration of a U.S. government tax credit to homebuyers contributed to a slowdown in residential construction that hurt growth in late 2010. The economy grew at an average 2.4 percent pace in the last six months of that year after expanding at a 3.9 percent pace in the first half.

Most stocks rose following the biggest weekly decline of the year, as investors weighed Francois Hollande’s election as France’s president and Greek voters flocking to anti-bailout parties. About six stocks rose for every five that fell on U.S. exchanges at the close in New York. The Standard & Poor’s 500 Index increased less than 0.1 percent to 1,369.58.

Elsewhere, German factory orders climbed more than forecast in March as demand from outside the euro area helped Europe’s largest economy weather the sovereign debt crisis.

In Australia, retail sales jumped 1.8 percent in the first quarter from the final three months of last year, the strongest performance since 2009, the Bureau of Statistics said in Sydney.

Comparisons Overstated

Comparisons between the U.S. economy this year and last are overstated, said Ian Shepherdson, chief U.S. economist for Valhalla, New York-based High Frequency Economics.

“The economic cause of the slowdown last year was much more substantial,” ” he said, adding that energy prices are already declining and Europe’s debt crisis hasn’t spread to U.S. banks. “There’s nothing I see fundamentally changed in the economy over the last couple of months.”

The average price of regular gasoline fell to $3.78 a gallon on May 6 from a 2012 high of $3.94 on April 4, according to data from AAA, the biggest U.S. auto group. The price of oil fell to $98.49 a barrel on the New York Mercantile Exchange on May 4 from a 2012 high of $109.77 on Feb. 24.

First-time applications for unemployment benefits are also falling. Jobless claims dropped to 365,000 in the week ended April 28 from 392,000 the previous week, close to the lowest level since the economic recovery began in June 2009.

Average Jobless Claims

Claims this year have averaged 373,000, compared with 417,000 in the first four months of 2011 and 475,000 in the same period of 2010.

The current level of claims is consistent with gains in payrolls of about 200,000, Shepherdson said. He forecasts the economy will add 230,000 jobs in May.

Not everyone agrees the U.S. economy is out of the danger zone. Oil prices may yet rise again, Europe’s debt crisis is still smoldering and Congress is gridlocked over budget cuts, said Jason Schenker, president of Prestige Economics LLC in Austin, Texas.

“There are big risks out there, and those haven’t gone away,” Schenker said. “And the current state of the economy, even excluding those risks, is one of very modest job creation and modest growth.”

Still, consumer confidence is higher this year, underpinning the spending that accounts for 70 percent of the world’s largest economy. Consumer spending rose at a 2.9 percent pace in the first quarter, the fastest in more than a year.

Comfort Index

The Bloomberg Consumer Comfort Index reached a four-year high in early April. Other measures also improved, with the Thomson Reuters/University of Michigan sentiment gauge reaching a one-year high last month, and the Conference Board’s index hovering near the one-year high reached in February.

Stock-market gains, propelled by better-than-forecast corporate earnings, are helping to boost consumer wealth and optimism. The S&P’s 500 Index was up almost 9 percent this year through May 4, even after last week’s jobs report trimmed its rally.

About 70 percent of S&P 500 companies that reported results since the start of the earnings season have beaten projections, according to data compiled by Bloomberg.

Visa Inc. (V), the biggest payments network, said May 2 that its fiscal second-quarter profit surged 47 percent as customer spending on credit and debit cards rose. The company boosted its profit outlook and its stock is now up 16 percent this year.

Credit Products

“Our strong financial performance this quarter was fueled by continued growth of U.S. credit products, strong cross-border spending and expansion of Visa’s core business in international markets,” Chairman and Chief Executive Officer Joseph W. Saunders said in a statement.

Job gains, record low mortgage rates and cheaper properties are underpinning residential real estate. Data released last month showed better-than-estimated new-home sales and a slowdown in price declines are bolstering optimism that the market is poised for a sustainable recovery.

Warren Buffett, whose Berkshire Hathaway Inc. has more than $19 billion invested in U.S. banks, said the lenders have ample liquidity and are a class apart from European rivals.

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire’s chairman and chief executive officer, said May 5 at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape.”

Loan Standards

U.S. banks “reported having eased standards on credit card, auto and other consumer loans,” according to the Federal Reserve’s survey of senior loan officers, released April 30. “Demand for consumer loans reportedly continued to increase, especially for auto loans.”

Julia Coronado, chief economist for North America at BNP Paribas in New York, said that report shows “there is some credit easing, and I would categorize it as the fading of a headwind” for the economy.

Loan growth has helped bolster U.S. auto sales that reached an annual pace of 14.4 million in April, up from an average of 12.7 million in 2011 and 11.6 million in 2010, according to data from Ward’s Automotive Group.

Stronger demand for automobiles bolstered U.S. manufacturing, which grew in April at the fastest pace in almost a year, according to Institute for Supply Management. The group’s factory index climbed to 54.8 last month, the best reading since June.

Skipping Shutdowns

Chrysler Group LLC, the biggest gainer of U.S. market share through April, said four plants will skip normally scheduled two-week midyear shutdowns to meet increased demand.

Factories in Belvidere, Illinois; Toluca, Mexico; and Detroit, and a parts factory in Toledo, Ohio, will stay open, the company said May 2 in a statement on its website. Two more plants will shut for one week instead of two, according to Auburn Hills, Michigan-based Chrysler.

“We need to build a few more vehicles, so they’re staying open,” Jodi Tinson, a company spokeswoman, said in a phone interview last week.

To contact the reporter on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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S&P 500 Halts 3-Day Slump After Europe Vote as Banks Rise

By Rita Nazareth - May 8, 2012 3:59 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) advanced, halting a three-day decline, as bank shares rallied after Warren Buffett said American lenders are in “fine shape” and investors weighed elections in France and Greece.

Banks had the biggest gain among 24 groups in the S&P 500 as Buffett said the nation’s lenders have “liquidity coming out of their ears” and are in better shape than European rivals. Walt Disney Co. (DIS) rose 2.1 percent as the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend. American International Group Inc. retreated 3 percent as the U.S. Treasury Department sold $5 billion of shares.

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France's Socialist Party (PS) newly elected president Francois Hollande celebrates at the Place de la Bastille in Paris on May 7, 2012 after the announcement of the first official results of the French presidential second round. Photographer: Thomas Coex/AFP/Getty Images

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May 8 (Bloomberg) -- Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, talks about U.S. stocks and his investment strategy. Sargen also discusses France's presidential election, Europe's sovereign debt crisis, and the region's common currency. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 7 (Bloomberg) -- Gina Martin Adams, an equity strategist at Wells Fargo Securities LLC, talks about the outlook for U.S. markets and investor sentiment. She speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

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Traders work on the floor of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

The S&P 500 advanced less than 0.1 percent to 1,369.58 at 4 p.m. New York time, following a 2.6 percent drop in three days. The measure fell as much as 0.4 percent earlier today. The Dow Jones Industrial Average slid 29.74 points, or 0.2 percent, to 13,008.53. About 6.3 billion shares changed hands on U.S. exchanges today, or 5.1 percent below the three-month average.

“U.S. banks are in pretty good shape,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “In addition, the perception is that European governments are not going to do anything stupid. We’re not talking about a wholesale change in fiscal policy. There was a big reaction to well-telegraphed news. It’s good to see a bounce from the lows.”

Stocks swung between gains and losses after Francois Hollande’s election as France’s president and as Greek voters flocked to anti-bailout parties. Hollande, who defeated Nicolas Sarkozy, pledged to push for less austerity. European stocks rebounded as German Chancellor Angela Merkel said she will receive Hollande with “open arms” as they work together to tackle the debt crisis.

‘On Surviving’

Barton Biggs, founder of the Traxis Partners LP hedge fund, said he isn’t adding to bearish equity bets in Europe. Biggs said on Bloomberg Television’s “In the Loop” with Betty Liu today that he continues to short German and French benchmark equity indexes, while being 70 percent net long on U.S. stocks. The region’s shared currency is “50/50 on surviving,” he said.

Voters are “signaling to their politicians that they want more stimulus and less austerity,” Biggs said today in a telephone interview. “If they don’t get it, they’re going to vote in new leaders. That’s a big deal, and I happen to think stimulus combined with reforms is the way to go.”

The S&P 500 dropped the most since December last week as a report showed employers added fewer jobs than forecast. The gauge was still up 8.9 percent in 2012 on better-than-estimated earnings. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

Banks Rally

A measure of banks in the S&P 500 rose 1.2 percent. All 24 stocks in the KBW Bank Index (BKX) advanced as the gauge rose 1 percent. Bank of America Corp. (BAC) added 2.8 percent, the most in the Dow average, to $7.96. Wells Fargo & Co. gained 1.4 percent to $33.50.

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire’s chief executive officer, said May 5 at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” until getting assistance from the European Central Bank, he said.

Wall Street firms including JPMorgan Chase & Co. (JPM) and Bank of America, emboldened after raising capital levels ahead of stricter international guidelines, are contesting efforts by U.S. policy makers to limit trading and risk. European banks have struggled amid the continent’s sovereign debt crisis and turned to the ECB for 1 trillion euros ($1.3 trillion) in three- year loans at a 1 percent interest rate.

‘The Avengers’

Walt Disney rose 2.1 percent to $43.82. “The Avengers” surpassed the previous-best opening weekend of $169.2 million in the U.S. and Canada, set last year by “Harry Potter and the Deathly Hallows: Part 2,” researcher Hollywood.com Box-Office said yesterday in a statement.

Tyson Foods Inc. climbed 3.3 percent to $18.63. The largest U.S. meat processor reported second-quarter earnings that beat analysts’ estimates and said it will boost stock buybacks by 35 million shares.

Vertex Pharmaceuticals Inc. (VRTX) surged 55 percent to $58.12. The maker of the first medicine to target the underlying cause of cystic fibrosis said a combination of the drug and a second therapy improved some patients’ ability to breathe in a mid- stage study.

AIG (AIG) lost 3 percent to $31.84. The Treasury is selling 163.9 million shares at $30.50 each, compared with the May 4 closing price of $32.83, the department said yesterday. The transaction reduces the Treasury’s stake in the insurer to 63 percent from 70 percent.

Cognizant Technology Solutions Corp. (CTSH) tumbled 19 percent to $56.30. The provider of consulting and outsourcing services cut its full-year sales and earnings forecasts.

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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Most U.S. Stocks Climb, Led by Banks, While Euro Weakens

By Michael P. Regan and Rita Nazareth - May 8, 2012 3:32 AM GMT+0700

May 7 (Bloomberg) -- Most U.S. stocks rose, led by banks, after billionaire investor Warren Buffett said American lenders are in “fine shape.” The euro slid for a sixth day and commodities fell after French Socialist Francois Hollande was elected president and Greek voters picked anti-bailout parties.

The Standard & Poor’s 500 Index (SPX) added less than 0.1 percent to 1,369.58 at 4 p.m. in New York as six stocks gained for every five that fell on U.S. exchanges. The euro lost 0.3 percent to $1.3051 as the shared currency extended its longest losing streak since September. Ten-year French yields slipped three points to 2.80 percent and the CAC-40 Index of stocks rallied 1.7 percent. The S&P GSCI Index of commodities fell for a fourth day, declining 0.2 percent. Ten-year U.S. Treasury yields were little changed at 1.88 percent.

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Traders work on the floor of the New York Stock Exchange on May 3, 2012. Photographer: Richard Drew/AP Photo

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May 7 (Bloomberg) -- Barry Knapp, head of equity strategy at Barclays Capital, talks about the outlook for U.S. markets. He speaks with Scarlet Fu on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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May 8 (Bloomberg) -- Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, talks about U.S. stocks and his investment strategy. Sargen also discusses France's presidential election, Europe's sovereign debt crisis, and the region's common currency. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 7 (Bloomberg) -- Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp. in Singapore, talks about U.S. and Asia stocks and his investment strategy. Menon speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 7 (Bloomberg) -- Barton Biggs, managing partner and co-founder of Traxis Partners LP, talks about the outlook for the euro region and his investment strategy. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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May 7 (Bloomberg) -- Dan Scott, an analyst at Credit Suisse AG, talks about investing in Europe after the French and Greek election results. He speaks from Zurich with Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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May 7 (Bloomberg) -- Francois Hollande defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy. Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Susan Li reports on Bloomberg Television's "First Up." (Source: Bloomberg)

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May 7 (Bloomberg) -- Anne Stevenson-Yang, co-founder of Beijing-based J Capital Research, talks about China's financial markets and economy. She speaks with John Dawson on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

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The euro fell 1.3 percent last week, the most in a month. Photographer: Simon Dawson/Bloomberg

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Socialist Hollande got about 52 percent against about 48 percent for Nicolas Sarkozy Photographer: Balint Porneczi/Bloomberg

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Pedestrians are reflected on an electronic stock board outside a securities firm in Tokyo, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Financial shares rose 0.7 percent as a group to lead gains among the 10 main industries in the S&P 500 after Buffett said U.S. lenders have “liquidity coming out of their ears.” Speculation that European austerity measures will be curbed grew after Hollande’s victory made him the first Socialist to take the helm of Europe’s second-biggest economy in 17 years. The Greek parliament will have three new anti-bailout parties represented.

“Every time Buffett gives the seal of approval, it helps certain stocks or segments of stocks,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “As for Europe, we’ve priced in some of what’s happened. Yet investors are not really quite sure of what to make of those trends.”

Retreat From April High

U.S. stocks rebounded from early losses, including a 1.5 percent drop in S&P 500 futures before exchanges opened in New York. The S&P 500 halted a three-day slump. The index tumbled 2.4 percent last week, its biggest drop of the year, as data on American and European labor markets boosted concern the global economy is weakening. The benchmark gauge of U.S. stocks has retreated 3.5 percent from an almost four-year high on April 2.

Walt Disney Co. (DIS) rallied 2.1 percent after “Marvel’s The Avengers” set box-office records with $200.3 million in ticket sales over the weekend. Fifth Third Bancorp and Bank of America Corp. rose almost 3 percent each, pacing gains in financial shares, after Buffett said U.S. lenders have “liquidity coming out of their ears.”

“I would put European banks and American banks in two very different categories,” Buffett, Berkshire Hathaway Inc. (BRK/A)’s chairman and chief executive officer, said May 5 at the firm’s annual meeting in Omaha, Nebraska. “The American banking system is in fine shape. The European system was gasping for air a few months back” before getting assistance from the European Central Bank.

Dow Average Retreats

Hewlett-Packard Co. and Caterpillar Inc. lost more than 1.2 percent to lead the Dow Jones Industrial Average (INDU) down 29.74 points to 13,008.53. The Dow and S&P 500 drifted between gains and losses for much for much of the day. American International Group Inc. (AIG) dropped 3 percent as the U.S. Treasury Department agreed to sell $5 billion of shares, with the bailed-out insurer buying $2 billion of the total.

Risk perceptions among U.S. equity and credit investors are diverging by the most since 2009 as signs of an economic slowdown spur bigger increases in prices to protect against losses in bonds than stocks. The VIX, the benchmark gauge of U.S. equity derivatives that usually rises when shares fall, closed last week at 0.032 times the level of the Markit CDX North America High Yield Index, which increases when confidence in debt issuers deteriorates, according to data compiled by Bloomberg. That’s near the 2 1/2-year low of 0.027 times reached in March.

European Markets

European stocks rose the most in more than a week as German Chancellor Angela Merkel said she will receive French president- elect Hollande with “open arms” as they work together to tackle the debt crisis. Hollande’s platform calls for policies Merkel opposes, including increased spending and a delayed deficit-reduction effort

The Stoxx Europe 600 Index (SXXP) reversed early losses to climb 0.7 percent, even as Greece’s ASE Index (ASE) plunged 6.7 percent in its worst drop since November. National Bank of Greece (TELL) SA tumbled 8.3 percent. Roche Holding AG (ROG) fell 3.5 percent, the most since November, after abandoning development of an experimental cholesterol drug. CSM NV, the world’s biggest maker of bakery ingredients, jumped 19 percent after saying it will sell its U.S. and European bakery-supply units.

Benchmark stock indexes in Italy and Spain led gains, rallying more than 2.5 percent each. Among European bond markets, Italy’s 10-year yield lost three basis points to 5.40 percent and Spain’s increased two points to 5.76 percent.

Euro Weakens

The euro weakened against 14 of 16 major peers. The shared pared losses after dipping below $1.30 for the first time since April 16, and slid 0.5 percent versus the pound. The Dollar Index, which tracks the U.S. currency against those of six trading partners, advanced 0.1 percent, rising for a sixth day in the longest streak since September

“Incumbents took a beating across Europe this weekend in what has been widely interpreted as a backlash against austerity,” Michala Marcussen, global head of economics at Societe Generale SA in Paris, wrote in a report today. “Failure to secure a political majority to meet the terms of the second Greek program could see the country inch towards euro exit. This would in our opinion be seen as a negative event, even beyond Greece’s borders.”

Euro Bets

The euro is confounding bears who predicted a meltdown as it gets an unexpected boost from the economic and political turmoil gripping Europe. The 17-nation currency has risen about 1 percent against nine peers from this year’s low on Jan. 16, while the dollar slid 2.3 percent, data compiled by Bloomberg show. Futures traders are trimming bets that it will fall against the dollar, while options show investors are less bearish.

In other European elections, Merkel’s party had its worst election result in more than half a century in the state of Schleswig-Holstein. Austerity measures aimed at stemming Europe’s turmoil have driven economies from the Netherlands to Spain back into recession, emboldening politicians campaigning for growth.

A reduction in austerity could put more pressure on the European Central Bank to act, according to David R. Kotok, Cumberland Advisors’ chairman and chief investment officer.

“Political momentum moves toward more monetary ease,” Kotok wrote in a note to clients. “We expect some form of balance sheet expansion before the end of this year. We expect credit spreads of weaker sovereigns to widen until the ECB enters the market or discusses that it may do so.”

Cotton, silver and soybeans dropped at least 0.9 percent to lead the S&P GSCI index lower. Crude oil slipped 0.6 percent to $97.94 a barrel, the lowest settlement price in three months.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; 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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