U.S. Stocks Fall on Europe Woes After Last Week’s Rally

U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from the highest level since 2007, as European finance chiefs deadlocked at debt-crisis talks and New York-area manufacturing slumped.
Bank of America Corp. (BAC) and Morgan Stanley slid more than 2.4 percent after two weeks of gains. Alcoa Inc. (AA) tumbled 2.6 percent as commodity shares plunged. Cliffs Natural Resources Inc. (CLF) lost 7 percent after its rating was cut by JPMorgan Chase & Co. (JPM) Apple Inc. (AAPL) gained 1.2 percent as pre-orders of its iPhone 5 topped 2 million units in one day. Office Depot Inc. (ODP) rose 5.3 percent after Starboard Value LP took a stake in the company.

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Traders work on the floor of the New York Stock Exchange during afternoon trading on Sept. 14, 2012. Photographer: Mario Tama/Getty Images

1:00

Sept. 17 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks fell, after the Standard & Poor’s 500 Index rallied to its highest level since 2007, as European finance chiefs deadlocked at debt-crisis talks and New York area manufacturing slumped. (Source: Bloomberg)

4:37

Sept. 17 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Adam Johnson report on today’s ten most important stocks including Bloomin' Brands, Office Depot and Apple. (Source: Bloomberg)

5:47

Sept. 17 (Bloomberg) -- Tim Hartzell, chief investment officer at Sequent Asset Management LLC, discusses Federal Reserve policy, U.S. stocks and investor sentiment towards Europe. He talks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

4:24

Sept. 17 (Bloomberg) -- David Kotok, chief investment officer at Cumberland Advisors Inc., talks about Federal Reserve monetary policy and investment strategy. Kotok speaks with Adam Johnson and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The S&P 500 slid 0.3 percent to 1,461.19 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 40.27 points, or 0.3 percent, to 13,553.1. About 5.7 billion shares traded hands on U.S. exchanges today, 5.4 percent below the three-month average.
“It looks like we need to take a small breather after the sizable rally that we’ve had,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said in an interview from Austin, Texas. His firm has $1.83 trillion in client assets. “There’s the potential for a small pull-back, but I think we will move back into the bull territory later in the week unless there’s an unexpected negative news event.”

EU Concern

The S&P 500 rallied last week to the highest level since December 2007 as the Federal Reserve’s plan to buy mortgage securities fueled demand for riskier assets. Commodity, financial and industrial shares had the biggest gains among 10 groups in the benchmark gauge, helping to extend its two-week advance to 4.2 percent. The index is about 7 percent away from its all-time high set in October 2007.
Stocks fell today as European Union finance ministers failed to agree on a timetable for a more unified banking sector and clashed over terms of bailout requests and the role of the European Central Bank at a meeting Sept. 14 in Cyprus. Citigroup Inc. became the latest bank to cut its growth forecast for China. At least 13 banks and brokerages have reduced their 2012 economic growth forecasts for the world’s second-largest economy this month.

Empire Manufacturing

U.S. equities also declined as the Federal Reserve Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
“To me the only question is if the stock market is going to correct its current overbought condition by going sideways, or if it is going to correct back to the 1,400-1,422 support,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, wrote in an e-mail today. His firm oversees $350 billion.
Financial and commodity shares had the biggest declines among 10 groups in the S&P 500. The Morgan Stanley Cyclical Index (CYC) tumbled 1.2 percent after rallying for four straight days. The Dow Jones Transportation Average slipped about 1.5 percent and the S&P Supercomposite Homebuilding (S15HOME) Index lost 1.9 percent after rallying 8.5 percent last week.
The KBW Bank Index declined 1.7 percent as 23 of its 24 companies slipped. Bank of America, which climbed 20 percent in the past two weeks, tumbled 2.6 percent to $9.30 for the second- biggest drop in the Dow. Morgan Stanley (MS) declined 2.4 percent to $17.80. Wells Fargo & Co. (WFC) fell 2.2 percent to $35.33 after Stifel Nicolaus & Co. cut the fourth-largest U.S. bank by assets to hold from buy.

Commodities Slide

Alcoa, the largest U.S. aluminum producer, fell the most in the Dow, sliding 2.6 percent to $9.58, as the S&P GSCI Spot Index of 24 commodities fell 2.2 percent, the most since July.
Cliffs Natural Resources slipped 7 percent to $42.36 for the biggest decline in the S&P 500. JPMorgan downgraded the stock to neutral from overweight.
Netflix Inc. (NFLX) fell 5.8 percent to $57.02. The world’s largest video-subscription service was rated underperform in new coverage at Macquarie Capital USA Inc.
Boeing Co. (BA) lost 1.9 percent to $69.92. Oppenheimer & Co. analyst Yair Reiner said shares of the world’s largest maker of cargo aircraft may fall, citing GEnx engine issues after one cracked on a Boeing 787 Dreamliner during testing in Charleston, South Carolina, on July 28, spewing hot metal parts.

Apple Rises

Apple gained 1.2 percent to a record $699.78 and exceeded $700 in extended trading for the first time ever. Pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device. Because demand for the iPhone 5 exceeds the initial supply, some pre-orders will be delivered to customers in October, rather than September as previously planned, Apple said today in a statement.
Office Depot rose 5.3 percent to $2.60. Starboard Value, a New York-based investment firm, took a 13.3 percent stake in the company, becoming its largest shareholder, and said the retailer must improve its financial results.
Gilead Sciences Inc. (GILD) rose 6.1 percent, the most in the S&P 500 (SPXL1), to $65.80 after JPMorgan analyst Geoff Meacham said the company’s AIDS drug, called Stribild, may emerge as a market leader based on a survey of 52 HIV specialists.

Obama Rally

As politicians debate whether Americans are better off than they were four years ago, the stock market is saying yes. With 50 days before the national election, the S&P 500 has rallied 82 percent and touched a four-year high since President Barack Obama took office.
The advance puts the gauge closer to the all-time high than any of the world’s biggest stock markets, data compiled by Bloomberg show. The benchmark index of American equity is trading at 14.9 times reported earnings, the biggest discount to MSCI’s global measure since March 2010.
“We are in a healthier state right now,” Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust in New York, said in a Sept. 12 phone interview. “Next year, we think the growth clip in the United States and the globe is going to be better than expected. Over the next three years, we are bullish.”
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Amanda Gould in New York at agould27@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Most U.S. Stocks Fall as Europe Offsets Bank, Tech Rally

By Inyoung Hwang - Aug 21, 2012 4:00 AM GMT+0700

Most U.S. stocks fell, after the Standard & Poor’s 500 Index rose to its highest level since April, as investor concern about Europe’s debt crisis overshadowed a rally in technology and financial companies.

Best Buy Co. lost 10 percent after saying its founder declined an offer from the board to conduct due diligence and go to shareholders with his buyout offer. Apple Inc. (AAPL) jumped 2.6 percent to its highest price ever, pacing a technology rally. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) added at least 1.1 percent as financial companies recovered from early losses.

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Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

7:36

Aug. 20 (Bloomberg) -- Adam Parker, U.S. equity strategist at Morgan Stanley, talks about the outlook for the U.S. stock market. He speaks with Linzie Janis on Bloomberg Television's "Street Smart." (Source: Bloomberg)

8:24

Aug. 20 (Bloomberg) -- James Bianco, president of Bianco Research LLC, Brian Angerame, a portfolio manager at Legg Mason Inc.'s ClearBridge Advisors, and Gina Martin Adams, an equity strategist at Wells Fargo Securities LLC, talk about Federal Reserve policies and their investment strategies. They speak with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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Aug. 20 (Bloomberg) -- Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, discusses investment strategy and the outlook for the Standard & Poor's 500 Index. He talks with Deirdre Bolton, Julie Hyman, Alix Steel and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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An employee cuts lumber for customers at a Lowe's Cos. store in the Brooklyn borough of New York. buyout offer. Lowe’s Cos. fell 4.2 percent after missing analysts’ profit predictions and cutting its earnings forecast. Photographer: Victor J. Blue/Bloomberg

The S&P 500 (SPX) was almost unchanged at 1,418.13 at 4 p.m. in New York, within a point of a four-year high set in April. The gauge fell 0.4 percent earlier as Germany’s Bundesbank stepped up its criticism of the European Central Bank’s bond-buying program. The Dow Jones Industrial Average lost 3.56 points, or less than 0.1 percent, to 13,271.64. Seven stocks fell for every five declining on U.S. exchanges, with volume at 4.9 billion shares, 23 percent below the three-month average.

“We’re at a pretty formidable technical resistance here,” Michael Strauss, who helps oversee about $26 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut, said in a telephone interview. “The Bundesbank does have a hard problem with this,” he said, referring to the ECB’s bond-buying program. “Germany is being put in the position as being the lender of last resort in Europe.”

The S&P 500 last week capped its longest stretch of weekly gains since January 2011 as economic reports beat forecasts and Germany backed the ECB’s bond-buying plan. Trading volume and volatility have dropped this month as vacationing traders await policy clues from the Federal Reserve’s summit at the end of the month and an ECB meeting in September.

‘Stability Risks’

Government bond purchases “entail significant stability risks,” the Bundesbank said in its monthly report today. The ECB’s governing council may decide at its next gathering to set yield limits on each country’s debt, Spiegel magazine reported yesterday, without saying where it got the information. The ECB said the council has not discussed any plan to target the bond yields and that “it is absolutely misleading to report on decisions,” a bank spokesman said in an e-mailed statement.

Reports in the U.S. this week will show that combined purchases of new and existing houses increased to a 4.89 million annual rate in July from a 4.72 million pace in June, according to the median forecasts in surveys of economists before releases from the National Association of Realtors on Aug. 22 and the Commerce Department the next day. Bookings for long-lasting goods may have climbed the most this year, a release from the Commerce Department will show Aug. 24, according to the median estimate.

Jackson Hole

The Fed will on Aug. 22 release minutes from the Aug. 1 meeting of the Federal Open Market Committee, when policy makers declined to initiate a third round of monetary stimulus, a policy known as quantitative easing. The S&P 500 has rallied 11 percent since June 1 on speculation the central bank may signal more easing at the Kansas City Fed’s annual conference on Aug. 30 to Sept. 1 in Jackson Hole, Wyoming.

The 13 percent rally in the S&P 500 this year through Aug. 17 has lifted the gauge to its highest level ever compared with strategists’ forecasts, a sign that the best may be over for U.S. equities in 2012.

Shares have climbed 2.1 percent above the average projection of 1,389 from 13 firms from Morgan Stanley to JPMorgan tracked by Bloomberg. That’s the biggest premium on record for this time of year, according to data going back to 1999. Estimates by strategists in August have come true for the last three years, with the S&P 500 rising 11 percent on average through December, the data show.

‘Core Fundamentals’

“The core fundamentals are not really a reason to be long stocks,” said Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, in an interview on Bloomberg Television’s “In the Loop” with Deirdre Bolton. “Core fundamentals, earnings and revenue growth have deteriorated to a great extent.”

Phone and consumer discretionary companies posted the biggest declines out of 10 groups in the S&P 500, falling more than 0.5 percent.

Best Buy erased 10 percent for the biggest decline in the S&P 500 to $18.16. The retailer’s board proposed that founder Richard Schulze, beginning in January, be allowed to take his buyout offer to shareholders, should the board decide to reject any definitive proposal to acquire shares. Schulze didn’t accept the proposal, according to Best Buy.

Lowe’s Tumbles

Lowe’s Cos. tumbled 5.8 percent to $26.26. The second- largest U.S. home-improvement retailer reported second-quarter earnings that trailed analysts’ estimates as comparable-store sales fell. Adjusted earnings per share were 65 cents. Analysts had projected 70 cents. The retailer cut its full-year profit forecast to $1.64 a share from a projection of $1.83 a share in May.

Waste Management Inc. (WM) decreased 3 percent to $34.60 after Barron’s reported the trash handler may be poised to fall as much as 15 percent because of operating performance. Garbage volume has been little changed to down for years because of conservation, recycling and slow industrial growth, Barron’s said.

Corinthian Colleges Inc. (COCO) slipped 1.2 percent to $2.42. The for-profit college operator forecast revenue in the first quarter will be no more than $405 million, missing the average analyst estimate of $406.4 million.

Financial stocks rose 0.3 percent after dropping as much as 0.3 percent earlier. Bank of America, the second-largest U.S. bank by assets, climbed 1.9 percent to $8.15. JPMorgan, the biggest bank in the nation by assets, added 1.1 percent to $37.37.

Apple Soars

Technology stocks increased 0.3 percent. Hewlett-Packard Co. soared 2.9 percent to $20.09 for the biggest gain in the Dow.

Apple, the world’s most valuable company, advanced 2.6 percent to $665.15. The company’s market value reached $623.52 billion, higher than Microsoft Corp.’s record of $620.6 billion, according to Howard Silverblatt, senior index analyst at S&P, in a note today. The iPhone and iPad maker surpassed $600 billion in market value last week on speculation that production has started on a smaller version of the iPad tablet as well as a new television product.

Facebook Inc. (FB), the operator of the world’s largest social- networking service, jumped 5 percent to $20.01 after falling last week to a record low that was close to half the stock’s initial public offering price of $38 in May.

Health-care stocks added 0.3 percent as a group. Coventry Health Care Inc. (CVH) surged 20 percent to $42.04. Aetna Inc. (AET), a health insurer, will pay $42.08 a share for the medical-care provider in cash and stock, the companies said in a statement today. Aetna’s shares climbed 5.6 percent to $40.18.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Asian Stocks Advance as China Moves to Ease Cash Crunch

By Jonathan Burgos - Aug 21, 2012 10:54 AM GMT+0700

Asian stocks rose, with the regional benchmark index heading for a three-month high, as China moved to alleviate a cash crunch and ahead of U.S. reports that are expected to show the world’s biggest economy is improving.

Samsung Electronics Co. (005930), the world’s No. 1 mobile-phone maker by sales, gained 1.3 percent in Seoul. Asia Pacific Breweries Ltd. jumped 4.8 percent in Singapore after Heineken NV raised its offer for a controlling stake in the maker of Tiger beer. PICC Property & Casualty Co. advanced 5.8 percent in Hong Kong after China’s biggest non-life insurer posted higher first- half earnings.

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The Woodside Petroleum Ltd. logo is displayed atop the company's headquarters in Perth. Photographer: Ron D'Raine/Bloomberg

The MSCI Asia Pacific Index (MXAP) added 0.5 percent to 121.36 as of 12:47 p.m. in Tokyo, heading for its highest close since May 8. About five shares rose for every three that fell in the gauge. The measure advanced in the past three weeks on expectations China will ease monetary policy and amid signs the U.S. economy is strengthening.

“U.S. economic data has been better, with the housing sector turning around,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion in assets. “Eventually, Asian exports will rebound. Asian equities aren’t overvalued after recent gains and Chinese equities are dearth cheap. China’s economic slowdown remains a key concern.”

U.S. Reports

China’s nation’s central bank stepped up reverse-repurchase operations today to ease a cash crunch, injecting 150 billion yuan ($24 billion) using seven-day contracts and a further 70 billion yuan via 14-day agreements, according to a trader at a primary dealer required to bid at the auctions. That’s the biggest injection since July 3.

Reports in the U.S. this week will show that combined purchases of new and existing houses increased to a 4.89 million annual rate in July from 4.72 million in June, according to the median forecast in surveys of economists before releases from the National Association of Realtors tomorrow and the Commerce Department the next day. Bookings for long-lasting goods may have climbed the most this year, a release will show Aug. 24, according to economist estimates.

Asian exporters gained. Samsung Electronics rose 1.3 percent to 1.3 million won in Seoul. Toyota Motor Corp., the world’s biggest carmaker, advanced 1.1 percent to 3,280 yen in Tokyo. Nintendo Co., the maker of Wii game consoles, increased 2.1 percent to 8,950 yen.

South Korea’s Kospi Index rose 0.5 percent, while Taiwan’s Taiex Index climbed 1 percent. Australia’s S&P/ASX 200 Index gained 0.7 percent and Japan’s Nikkei 225 Stock Average (NKY) added 0.1 percent. Hong Kong’s Hang Seng Index slipped 0.1 percent and China’s Shanghai Composite Index advanced 0.6 percent.

Cash Injection

Futures on the Standard & Poor’s 500 Index rose less than 0.1 percent today. The underlying gauge yesterday closed little changed at 1,418.13. Trading volume and volatility have dropped this month as traders await policy clues from the Federal Reserve’s summit at the end of the month and a European Central Bank meeting in September.

Government bond purchases “entail significant stability risks,” Germany’s Bundesbank said in its monthly report yesterday. The ECB’s governing council may decide at its next gathering to set yield limits on each country’s debt, Germany’s Spiegel magazine reported Aug. 19, without saying where it got the information. The ECB council hasn’t discussed any plan to target the bond yields, a central bank spokesman said in an e- mailed statement.

Asia Pacific Breweries climbed 4.8 percent to S$53 in Singapore after Heineken boosted its bid for Fraser & Neave Ltd.’s stake in the Southeast Asian brewer to S$5.6 billion ($4.5 billion). Trading in the stocks was halted on Aug. 17 before announcements on the bid, and the city’s stock market was closed yesterday.

PICC Property

PICC Property & Casualty jumped 5.8 percent to HK$9.31. First-half net income climbed 24 percent from a year earlier to 6.53 billion yuan ($1 billion), the Beijing-based insurer said in a statement to the Hong Kong stock exchange yesterday.

Of the 444 companies in the Asia-Pacific index that have reported quarterly earnings since July 1, and for which Bloomberg has estimates, about 54 percent have failed to meet projections, according to data compiled by Bloomberg.

The MSCI Asia Pacific Index retreated 6.4 percent from a Feb. 29 high through yesterday amid concern China’s economy is slowing and Europe’s debt crisis is deepening. Stocks on the measure were valued at 12.6 times estimated earnings on average, compared with 13.7 times for the Standard & Poor’s 500 Index and 11.7 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Facebook Director Stock Sales Top $1 Billion as Lock-Up Expires

By Brian Womack and Ari Levy - Aug 21, 2012 11:01 AM GMT+0700

Facebook Inc. (FB) director Peter Thiel sold most of his stake in the operator of the world’s largest social-networking website, bringing his proceeds to more than $1 billion, after restrictions on insider sales ended.

Thiel, one of Facebook’s earliest investors, sold about 20.1 million shares in the company on Aug. 16 and Aug. 17, raising $395.8 million, according to a filing yesterday with the U.S. Securities and Exchange Commission. Thiel, a venture capitalist and hedge-fund manager, had already generated $640.1 million in sales during the initial public offering.

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Facebook Inc. director Peter Thiel. Photographer: Jin Lee/Bloomberg

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With an investment of $500,000 in 2004, Thiel is one of the biggest beneficiaries of Facebook’s gain before going public. Later backers haven’t fared as well, with the stock losing almost half its value since the IPO amid signs that the company’s growth is slowing and concerns that more insiders will exit their stakes. The sales disclosed yesterday were tied to a plan adopted on May 18, Facebook’s first day of trading.

“As of last May, he had basically handed over discretion about these sales,” said Stephen Diamond, associate professor of law at Santa Clara University.

Jeremiah Hall, a spokesman for Thiel, and Ashley Zandy, a spokeswoman for Facebook, declined to comment.

Facebook last week unlocked 271.1 million shares, the first of five insider-sale restrictions scheduled during the company’s first year as a public company. Another 1.44 billion shares will be freed up through November.

Shares in Menlo Park, California-based Facebook rose 5 percent to $20.01 at the close in New York yesterday.

Accel Distribution

Another Facebook investor, Accel Partners, distributed more than 50 million shares to investors in the venture capital firm’s funds on Aug. 16, according to another filing yesterday.

Thiel’s sale, at prices from $19.27 to $20.69 a share, represents most of the 27.9 million shares the investor held after the IPO. He still holds more than 5 million shares, and the proceeds don’t reflect underwriter or broker fees.

Thiel freed up extra shares for sale when he converted more than 9 million shares to Class A from Class B, according to a document filed Aug. 10 with the U.S. Securities and Exchange Commission.

As a co-founder of PayPal Inc., he served as chief executive officer until the company was bought by EBay Inc. (EBAY) for $1.5 billion in 2002. Thiel, who’s also a member of the so- called “PayPal Mafia,” used his fortune to start hedge fund Clarium Capital Management LLC and to invest in startups.

One of those startups was Facebook, a social-networking service devoted to college campuses at the time of the investment in 2004. Thiel also participated in a $25 million funding round in 2006 when the company was valued at $500 million.

-- Editors: Reed Stevenson, Tom Giles

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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U.S. Stocks Post Longest Slump in 1 Month on Europe Woes

By Rita Nazareth and Julia Leite - Jul 10, 2012 4:52 AM GMT+0700

U.S. stocks fell, giving benchmark indexes the longest slump in more than a month, after a jump in Spanish bond yields above 7 percent intensified concern about Europe’s crisis and as investors awaited Alcoa Inc.’s results.

Alcoa advanced 0.2 percent at 5:46 p.m. New York time after earnings and revenue analysts’ beat estimates. Exxon Mobil Corp. (XOM) and DuPont Co. dropped more than 1.3 percent to pace losses among the biggest companies. The largest payment networks Visa Inc. (V) and MasterCard (MA) Inc. slumped at least 1.3 percent after being downgraded at UBS AG. Patriot Coal (PCX) Corp. plunged 72 percent before it filed for bankruptcy protection.

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Traders work on the floor of the New York Stock Exchange in New York. Photographer: Scott Eells/Bloomberg

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July 9 (Bloomberg) -- Bloomberg’s Adam Johnson, Trish Regan and Matt Miller report on today’s ten most important stocks including Boeing, Visa and Alcoa. (Source: Bloomberg)

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July 9 (Bloomberg) -- Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co., and Dan Stecich, a senior vice president at TJM Institutional Services, talk about the outlook for U.S. corporate earnings and the stock market. They speak with Stephanie Ruhle and Adam Johnson on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

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July 9 (Bloomberg) -- Michael Holland, chairman of Holland & Co., talks about the outlook for quarterly corporate earnings, investment strategy for stocks and JPMorgan Chase & Co.'s trading loss. Holland speaks with Betty Liu, Dominic Chu, Sheila Dharmarajan, Josh Lipton and Alix Steel on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The Standard & Poor’s 500 Index slid 0.2 percent to 1,352.46 at 4 p.m. New York time. The measure dropped 1.6 percent in three days for the longest slump since June 1. The Dow Jones Industrial Average lost 36.18 points, or 0.3 percent, to 12,736.29. Volume for exchange-listed stocks in the U.S. was 5.1 billion shares, 24 percent below the three-month average.

“It’s very concerning,” said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank in Portland, Oregon. His firm manages $169 billion. “Seven percent is not a sustainable level of interest rates for Spain. That’s scary stuff. We can’t have one of our best trading partners going through terrible economic times and not having an effect on U.S. corporate earnings,” he said, referring to Europe.

Stocks joined a global slump as the yield on Spain’s 10- year bond rose above the threshold that prompted bailouts in Greece, Ireland and Portugal. German Finance Minister Wolfgang Schaeuble dismissed a rapid move toward direct bank recapitalization by the European rescue fund, limiting the tools for shoring up Spanish banks as the euro-area crisis simmers.

Earnings Season

Investors also awaited the start of the earnings season as analysts’ estimates signal the first year-over-year profit decline for S&P 500 companies since 2009. Forecasts compiled by Bloomberg show a 1.8 percent drop in profits in the second quarter. Revenue is projected to increase by 2.5 percent.

“People are too pessimistic about earnings,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management. His firm oversees $160 billion. “We may get some better price action in the U.S. as results come in.”

Alcoa (AA), the first company in the Dow to report second- quarter results, added 0.2 percent to $8.78 after the market close. Profit excluding a restructuring charge and other items was 6 cents a share, compared with the 5-cent profit that was the average of 19 estimates compiled by Bloomberg. Sales fell to $5.96 billion from $6.59 billion, exceeding the $5.81 billion average of 11 estimates.

AMD Slumps

Advanced Micro Devices Inc. slumped 9.4 percent to $5.09 after the close of regular trading. It said second-quarter sales fell 11 percent from the previous period, reducing an earlier forecast, citing weaker-than-expected sales in China (AMD) and Europe as well as tepid consumer demand.

Today’s decline trimmed this year’s gain in the S&P 500 to 7.5 percent. Stocks fell last week as jobs data heightened concern about a slowing economy and Europe’s efforts to tame its debt crisis disappointed investors.

Eight out of 10 groups in the S&P 500 retreated as commodity and consumer discretionary shares had the biggest losses. DuPont, a U.S. chemicals producer, slumped 2.9 percent to $47.47. Exxon Mobil fell 1.4 percent to $83.65.

Visa retreated 1.3 percent to $123.65, while MasterCard declined 2.4 percent to $431.27. UBS analyst John Williams changed his rating on the firms’ shares today to sell from neutral, citing weaker U.S. economic data and a global slowdown in growth. Williams said this could harm Visa and MasterCard, which are among the top three performing shares in the S&P’s Information Technology Index (S5INFT) since 2011.

Record Highs

The companies’ shares “sit near all-time highs despite exposure to a weakening global consumer spending backdrop, which makes a slowdown in key metrics inevitable over the next 3 to 6 months,” Williams wrote. “Multiple data points indicate global growth is slowing -- clear negatives for the shares.”

Patriot Coal tumbled 72 percent to 61 cents as two people with knowledge of the matter said the U.S. fuel producer could seek bankruptcy protection as early as today. Patriot filed for bankruptcy after the market closed, as milder winters and a shift to natural gas sent coal demand to a 24-year low.

Navistar International Corp. (NAV) sank 3.1 percent to $23.67. The maker of International brand trucks dropped after Bloomberg Industries said truckmakers will need to reduce production in the second half of the year.

The Bloomberg U.S. For-Profit Education Index (USEDU) of 13 stocks tumbled 4.7 percent. Bridgepoint Education Inc. (BPI) plunged 34 percent to $14.25. The for-profit college company that owns Ashford University tumbled after Ashford’s accreditation application was denied by a regional accreditor.

Declining Prospects

TD Ameritrade Holding Corp. (AMTD) slumped 2.4 percent to $16.40 as declining growth prospects prompted Goldman Sachs Group Inc. to downgrade the online brokerage to sell from neutral.

A measure of health-care stocks had the biggest gain among 10 S&P 500 groups, rising 0.6 percent, amid takeover optimism.

Amerigroup Corp. (AGP) surged 38 percent to $88.79. WellPoint (WLP) Inc., the second-biggest U.S. health insurer, agreed to buy the company for $4.9 billion in cash to expand the number of Medicaid patients it serves as the U.S. health plan for the poor undergoes broad changes in how it is managed.

WellPoint added 3.4 percent to $61.95. The deal also boosted the value of other insurers focusing on Medicaid. WellCare Health Plans Inc. (WCG) soared 18 percent to $62.56. Molina Healthcare Inc. (MOH) rallied 18 percent to $27.12.

Apple Gains

Apple Inc. (AAPL) rose 1.3 percent to $613.89. The world’s most valuable company may sell 4 million to 6 million still-to-be- released smaller iPad tablets in this year’s fourth-quarter holiday season, according to Piper Jaffray Cos. The firm rates Apple overweight, the equivalent of a buy recommendation.

“We believe the smaller iPad, while potentially cannibalizing 10 percent of full size iPad sales, could take 30 percent of total Android tablet sales in the December quarter,” Gene Munster, an analyst for Piper Jaffray, said in a note.

Boeing Co. (BA) added 0.5 percent to $74.03. It is set to win an order this week from United Continental Holdings Inc. for 100 of the planemaker’s 737 jets in a transaction that may be valued at about $8.4 billion, people familiar with the matter said.

The same securities analysts warning of the first decline in quarterly earnings since 2009 are also more bullish than ever on U.S. stocks.

A total of 247 companies in the S&P 500 have more buy ratings than sells and holds, a record in Bloomberg data starting in 2000. Bullish recommendations have been expanding even as Wall Street firms cut their forecast for second-quarter net income in the U.S. to a decrease of 1.8 percent from a gain of 2 percent in April, estimates compiled by Bloomberg show.

Bulls vs Bears

Bears say rising equity volatility, declining profits and the approaching U.S. presidential election mean the 4.5 percent drop in the S&P 500 since April will continue. Bulls say analysts are advising clients to buy because earnings are still on track to reach a record this year and the index is trading 16 percent below its average valuation since the 1950s.

“My picks aren’t based on one quarter,” Howard Rubel, a New York-based equity analyst at Jefferies & Co., said in a July 5 phone interview. “It’s not always captured in a headline how many pieces of judgment one needs to incorporate into a stock recommendation, and a quarterly earnings report is only one item. You have to look at things over a period of time.”

The last time earnings and share ratings diverged was the third quarter of 2009, when the S&P 500 was six months into a rally that lifted it more than 100 percent through April 2012. Analysts predicted a 23 percent drop in S&P 500 annual profit, while 205 companies in the index had more buy ratings than sells and holds. The June-to-August period that year was the index’s last quarter of negative earnings growth.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Asia Stocks Drop as U.S., Japan Data Fuels Growth Concern

By Adam Haigh - Jul 9, 2012 8:09 AM GMT+0700

Asian stocks fell for a third day amid concern slower growth is damaging earnings after Premier Wen Jiabao said China’s economy faces “relatively large” downward pressure and Japanese machinery orders fell more than expected following a disappointing U.S. jobs report.

Komatsu Ltd. (6301), a Japanese maker of construction equipment, lost 3.1 percent. BHP Billiton Ltd. (BHP), the world’s biggest mining company, slid 1.6 percent as metals prices dropped. Iluka Resources Ltd. (ILU) tumbled 18 percent after the Australian miner said revenue will miss estimates. Chinese developers traded in Hong Kong may be active after Wen pledged to stabilize home prices.

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The MSCI Asia-Pacific declined 0.7 percent to 117.75 as of 9:10 a.m. in Tokyo. Photographer: Kiyoshi Ota/Bloomberg

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Komatsu Ltd., a Japanese maker of construction equipment, lost 2.5 percent. Photographer: Tomohiro Ohsumi/Bloomberg

The MSCI Asia Pacific Index (MXAP) declined 0.8 percent to 117.68 as of 9:40 a.m. in Tokyo before markets in China and Hong Kong opened. Four stocks dropped for each that rose. The gauge has fallen 8.8 percent from this year’s high in February amid concern economic expansion is faltering in China and the U.S. as Europe’s debt crisis deepens.

“Long-term growth issues remain,” said Masahiko Ejiri, a senior fund manager in Tokyo at Mizuho Asset Management Co., which oversees $39 billion. “I’m negative on the macro-economic environment and I’m staying defensively positioned. There needs to be more stimulus from authorities to address slowing growth.”

The MSCI Asia-Pacific declined 8.8 percent from this year’s highest level in February through July 6 amid concern economies in China and the U.S. are slowing as Europe’s debt crisis deepens. Still, the gauge has risen 4.2 percent in 2012 through July 6, compared with a 7.7 percent advance on the S&P 500 and a 4 percent increase on the Stoxx Europe 600 Index. Asian shares advanced last week on anticipation central banks would ease monetary policy to spur growth.

Relative Value

Stocks in the Asian benchmark are valued at 12 times estimated earnings on average, compared with 13 times for the S&P 500 and 10.6 times for the Stoxx 600.

Japan’s Nikkei 255 Stock Average slid 1 percent and the broader Topix Index lost 0.9 percent. South Korea’s Kospi declined 1.2 percent and Australia’s S&P/ASX 200 Index retreated 1 percent.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today. The underlying gauge slid 0.6 percent last week. American employers hired fewer workers than forecast in June and the unemployment rate held at 8.2 percent, a June 6 report showed.

Earnings Season

Alcoa Inc. (AA) is due to posts results today, the first Dow Jones Industrial Average company in the U.S. to release earnings. Analysts project a 1.8 percent decline in profits for S&P 500 companies in the April-June period, which would mark the first year-over-year decrease since 2009.

Wen Jiabao, speaking four days after China’s central bank announced the second interest-rate cut in a month, said downward pressure on the economy is still “relatively large.” The government will intensify fine-tuning of policies even as measures taken since April are helping to stabilize a slowdown, he said, the official Xinhua News Agency reported yesterday.

“We must unswervingly continue to implement all manner of controls in the property market to allow prices to return to reasonable levels,” the reported Wen as saying. “We cannot allow prices to rebound.”

Japanese machinery orders, an indicator of capital spending, fell 14.8 percent in May from the previous month, the Cabinet Office said. Economists expected a 2.6 percent decline.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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Stocks Fall as Treasuries Rise After U.S. Jobs Report

By Michael P. Regan and Lu Wang - Jul 7, 2012 3:50 AM GMT+0700

Stocks (SXXP) and commodities sank, while Treasuries rose for a second day, as slower-than-forecast growth in U.S. payrolls fueled concern the economic recovery is slowing. The dollar strengthened against 14 of 16 major peers, with the euro setting a two-year low of $1.2266.

The Standard & Poor’s 500 Index slid 0.9 percent to 1,354.67 at 4 p.m. in New York, sending it lower for the week. Treasury 10-year yields fell five basis points to 1.55 percent. Spain’s 10-year yield climbed as much as 26 basis points to 7.04 percent, while the yield on German two-year notes fell below zero. Three-month Euribor, or the rate European banks say they see each other lending in euros, fell to an all-time low. Oil, natural gas and wheat lost more than 3 percent to help lead commodities lower.

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Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

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July 6 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., and Kathy Boyle, president and founder of Chapin Hill Advisors, talk about the outlook for stocks, Federal Reserve monetary policy and the U.S. dollar. They speak with Adam Johnson and Alix Steel on Bloomberg Television's "Street Smart." Jason Schenker of Prestige Economics LLC also speaks. (Source: Bloomberg)

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July 6 (Bloomberg) -- Steven Bell, chief economist at GLC Ltd., discusses yesterday's European Central Bank policy announcement and the U.S. economy ahead of today's non-farm payrolls report for June. He talks with Mark Barton and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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July 6 (Bloomberg) -- Neel Kashkari, head of global equities at Pacific Investment Management Co., talks about the June payrolls report, the global economy and investment strategy. Kashkari speaks with Erik Schatzker and Scarlet Fu on Bloomberg Television's "Market Makers." (Source: Bloomberg)

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July 6 (Bloomberg) -- Bruce Kasman, chief economist at JPMorgan Chase & Co., talks about the European sovereign-debt crisis and outlook for the U.S. economy and labor market. He speaks with Tom Keene and Scarlet Fu on Bloomberg Television's "Surveillance." (Source: Bloomberg)

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July 6 (Bloomberg) -- Russ Koesterich, global chief investment strategist for the IShares unit of BlackRock Inc., talks about the U.S. June payrolls report, the economy and market strategy. Koesterich speaks Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Austan Goolsbee, a professor at the University of Chicago Booth School of Business and a former chairman of the White House Council of Economic Advisers, talks about the June U.S. employment report and the economy. Goolsbee speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Global equities extended losses this morning after U.S. Labor Department data showed payrolls increased 80,000 last month, less than a 100,000 gain forecast in a Bloomberg survey. The European Central Bank yesterday reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month as policy makers tried to revive the global economy.

“There is weakness around the world,” Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said in an interview on Bloomberg Television. “When you are at extremely low levels of policy interest rates, you can’t expect that that’s going to jump-start the economy.”

Alcoa Inc., Hewlett-Packard Co., Caterpillar Inc., Bank of America Corp. and International Business Machines Corp. lost at least 2 percent to lead declines in the Dow Jones Industrial Average. (INDU)

Technology Shares

Informatica Corp. (INFA) slumped 28 percent, the most in 11 years, after the software provider reported second-quarter earnings and revenue that missed analysts’ estimates. Technology companies fell 1.8 percent as a group, the most among 10 industries in the S&P 500. Teradata Corp. and Citrix Systems Inc. sank more than 7.5 percent for the biggest declines in the S&P 500.

Today’s losses left the S&P 500 down 0.6 percent for the week. The labor report showed the unemployment rate held at 8.2 percent. Private employment, which excludes government jobs, increased 84,000 in June, the weakest in 10 months. Today’s data is the last monthly report before the Federal Reserve’s next policy meeting. The Federal Open Market Committee is scheduled to releases its statement on monetary policy and the economic outlook on Aug. 1.

‘Sustained Improvement’

“The Fed is looking for sustained improvement in the labor market,” John Canally, an economist and investment strategist at LPL Financial Corp. in Boston, said in a telephone interview. The firm oversees about $330 billion. “This report does push the Fed closer to quantitative easing. If the current trend continues, they are almost going to have to do something later this year.”

The government’s previous employment report on June 1 showed 69,000 jobs were created in May, the weakest growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. Since then, the S&P 500 had rallied 7 percent through yesterday and 10-year rates have increased.

The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa Inc. is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.

Earnings Season

Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent.

Earnings at energy companies fell 16 percent to lead the decline among the 10 main groups in the S&P 500, the estimates show, followed by a 12 percent decrease in profits at raw- material producers. Crude oil tumbled 18 percent in the second quarter to drag the S&P GSCI Index of commodities down 13 percent, the worst declines for both since the final three months of 2008.

Five shares fell for each that advanced in the Stoxx Europe 600 Index, which slid 1 percent and trimmed its weekly gain to 1.3 percent. Spain’s largest banks, Santander SA and Banco Bilbao Vizcaya Argentaria SA (BBVA), fell at least 3.9 percent. Fifteen of 19 groups in the Stoxx 600 retreated. Industrial production decreased for the ninth month in May, the National Statistics Institute in Madrid said.

A gauge of car companies tumbled 3.3 percent to lead declines after PSA Peugeot Citroen reported that first-half deliveries dropped 13 percent from a year earlier and its share of the European market declined. The region’s second-biggest carmaker tumbled 7.7 percent.

Euro Slumps

The euro extended its weekly loss against the dollar to more than 3 percent, the worst drop since September. The shared currency weakened against 14 of 16 major peer today and 15 of 16 over the last week.

The rate on German two-year notes was at minus 0.01 percent. The euro interbank offered rate, or Euribor, for three- month loans was 0.549 percent, compared with 0.641 percent yesterday, European Banking Federation data showed.

The cost of insuring against default on European sovereign debt rose for a third day, with the Markit iTraxx SovX Western Europe Index of contracts on 15 governments climbing 8.1 basis points to a midprice of 285.5.

Commodities Drop

Oil in New York dropped 3.2 percent to settle at $84.45 a barrel. Corn ended a 12 percent rally over three days that was due to dry weather crop damage in the U.S., the world’s biggest exporter of the grain. All but five of the 24 commodities tracked by the S&P GSCI Index declined, with natural gas, cocoa, oil, nickel and wheat losing more than 2.5 percent to lead declines.

The MSCI Emerging Markets Index (MXEF) lost 1 percent, trimming its weekly advance to 0.9 percent. The Micex Index fell 1.5 percent in Moscow. Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, dragged South Korea’s Kospi Index down 0.9 percent after sales missed estimates. The Shanghai Composite Index gained 1 percent as shares of developers and industrial companies advanced.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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U.S. Stocks Retreat as Jobs Growth Trails Forecasts

By Lu Wang and Julia Leite - Jul 7, 2012 3:46 AM GMT+0700

U.S. stocks declined, erasing a weekly gain for the Standard & Poor’s 500 Index, as slower-than- forecast growth in payrolls fueled concern that the economic recovery is slowing.

All 10 industry groups in the S&P 500 retreated. Alcoa Inc. (AA), Freeport-McMoRan Copper & Gold Inc. (FCX) and Schlumberger Ltd. (SLB) slid at least 1.3 percent as commodity shares declined. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) dropped at least 1.4 percent to pace losses among financial companies. Computer and software shares slumped after Informatica Corp. and Seagate Technology Plc (STX) said earnings missed their forecasts.

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Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months. Photographer: Richard Drew/AP Photo

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July 6 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., and Kathy Boyle, president and founder of Chapin Hill Advisors, talk about the outlook for stocks, Federal Reserve monetary policy and the U.S. dollar. They speak with Adam Johnson and Alix Steel on Bloomberg Television's "Street Smart." Jason Schenker of Prestige Economics LLC also speaks. (Source: Bloomberg)

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July 6 (Bloomberg) -- Jason Brady, a managing director at Thornburg Investment Management, and Bob Iaccino, founder and president of TraderOutlook.com, talk about investment strategy and the outlook for financial markets. They speak with Scarlet Fu and Adam Johnson on Bloomberg Television’s “Lunch Money." (Source: Bloomberg)

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July 6 (Bloomberg) -- Bloomberg's Dominic Chu reports on the market reaction to the June employment report. Payrolls rose 80,000 last month after a 77,000 increase in May, the Labor Department reported today. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, talks about investment strategy, monetary stimulus and the U.S. economy. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

The S&P 500 slipped 0.9 percent to 1,354.68 at 4 p.m. in New York, reversing its gain for the week to a loss of 0.6 percent. The Dow Jones Industrial Average dropped 124.20 points, or 1 percent, to 12,772.47. Volume for exchange-listed stocks in the U.S. was 5.1 billion shares, 25 percent below the three- month average and the second-slowest full trading day of 2012.

“It confirms the view that the U.S. economy is slowing,” said Jack Ablin, chief investment officer of BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets. “We are creating jobs at about less than half the pace in the second quarter than we did in the first quarter, either because of influences from abroad or seasonal adjustments.”

Equities fell as Labor Department figures showed payrolls rose 80,000 last month after a 77,000 increase in May. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 percent. Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months.

‘Disappointing Report’

“On balance it’s a mildly disappointing report,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “It’s hard for investors to get overly enthused about it unless in this bizarre world you believe this number gives the Fed more impetus to step up with QE3,” he said, referring to another round of stimulus action by the Federal Reserve.

The Fed has already purchased $2.3 trillion of securities in two so-called quantitative-easing programs. Chairman Ben S. Bernanke, speaking at a June 20 Washington press conference, said the Fed is focusing “primarily” on the outlook for jobs in deciding whether to ease further, and more action would be needed without “sustained improvement in the labor market.”

U.S. stocks declined yesterday, halting a three-day advance for the S&P 500, amid disappointment over Europe’s efforts to tame the region’s debt crisis. The European Central Bank reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month.

Commodities Tumble

Commodity shares in the S&P 500 slumped 1.2 percent as a group today. The S&P GSCI Index of commodities lost 2.4 percent as oil and gold prices declined. Alcoa, the largest U.S. aluminum producer, tumbled 2.2 percent to $8.73. Freeport- McMoRan, a copper and gold company, fell 1.3 percent to $35.01 while oilfield services company Schlumberger slid 1.4 percent to $65.17.

The Morgan Stanley Cyclical Index (CYC) of companies most-tied to economic growth erased 1.3 percent. The Dow Jones Transportation Average slumped 1 percent. JPMorgan slipped 1.4 percent to $33.90 while Bank of America lost 2.1 percent to $7.66.

Technology Slump

Technology shares dropped the most among S&P 500 groups, erasing 1.8 percent. Informatica (INFA) plunged 28 percent to $31.39, the biggest loss since 2001. The provider of corporate data- integration software reported second-quarter earnings and revenue that unexpectedly dropped, missing analysts’ estimates. Informatica said it didn’t adapt as rapidly as it should have to a downturn in demand, especially in Europe.

Other software companies tumbled. Teradata Corp. (TDC) fell the most in the S&P 500, sinking 10 percent to $65.01, while Citrix Systems Inc. (CTXS) had the second-biggest drop, tumbling 7.6 percent to $77.45.

Seagate declined 0.5 percent to $24.96. The world’s largest maker of computer disk drives said fiscal fourth-quarter sales and profit margin would miss the company’s previous forecast, citing reduced hard-drive shipments and a “supplier quality issue” that affected some products.

Acme Packet Inc. (APKT) slumped 14 percent to $15.74. The maker of devices that help transmit voice and data over Internet networks said second-quarter earnings missed its expectation because of continued weakness in the North American service provider market. F5 Networks Inc. (FFIV), a developer of software for Internet traffic management, dropped 6.9 percent to $94.49.

Airlines Gain

Navistar International Corp. (NAV) fell 15 percent to $24.42. The maker of International brand trucks said it expects additional costs to introduce an engine that will meet U.S. emission standards after its earlier technology failed to comply.

Airlines advanced as a drop in oil spurred expectations that fuel costs will fall. Southwest Airlines Co. (LUV) gained 1.3 percent to $9.27 while Delta Air Lines Inc. rose 3.5 percent to $11.

The government’s previous employment report on June 1 showed the weakest jobs growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. The S&P 500 has rallied 6 percent since then.

Earnings Season

The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.

Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent. Analysts still predict profit growth of 7.2 percent for the full year.

Slower-than-forecast growth in employment means labor costs won’t be a threat to corporate profits, according to Neel Kashkari, head of global equities at Pacific Investment Management Co.

“Corporate taxes are not going to go up, cost of labor is going to stay low,” he said in an interview on Bloomberg Television’s “Market Makers” program today. “Corporate profits can continue to stay strong in the short term.”

Pimco is being very selective when it comes to which stocks to buy and is focusing on companies that should be more resilient in the face of a global economic slowdown, Kashkari said. He cited companies such as Wal-Mart Stores Inc. (WMT), the world’s largest retailer, low-fare carrier Spirit Airlines (BUSAIRL) Inc. and drugmaker Merck & Co.

Largest Fund

“There are individual names that should do well in this environment,” he said. The Newport Beach, California-based firm’s Pimco Total Return Fund is the world’s largest mutual fund.

The risk of economic shocks from Europe’s debt crisis and slowing growth in China create a flight to high-quality global companies, Kashkari said. Investors should stop holding cash and come back to the market before inflation accelerates as a result of central bank policies meant to stimulate growth, he said.

“Investors are waiting on volatility, but earnings will decay as prices around the economy rise,” he said. “Sitting in cash is not a good option.”

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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