BLBG: U.S. Stocks Drop on Retail Sales Slump; Citigroup, Macy’s Fall
U.S. stocks slid to a five-week low, following markets in Europe lower, after a government report showed retail sales slumped at more than twice the rate forecast by economists, spurring concern the recession is deepening.
JPMorgan Chase & Co., Macy’s Inc. and American Express Co. tumbled at least 3.5 percent after the Commerce Department said purchases decreased 2.7 percent in December as job losses and dwindling access to credit forced consumers to reduce spending. Citigroup Inc. slid as much as 15 percent as Chief Executive Officer Vikram Pandit works to unravel the financial-services empire following four straight quarters of losses.
“The economy is going to feel really bad and we’ll continue to get negative headline news,” said Eric Green, director of research at Penn Capital Management, which oversees $3 billion in Cherry Hill, New Jersey. “There’s massive stimulus that we’ve never seen before coming. That will help the consumer.”
The Standard & Poor’s 500 Index lost 2.6 percent to 849.28 at 10:13 a.m. in New York, below its lowest close since Dec. 4. The Dow average slumped 194.5 points, or 2.3 percent, to 8,254.06. The Russell 2000 Index lost 2.4 percent. The Dow Jones Stoxx 600 Index of European shares slipped 3.3 percent for its sixth straight retreat.
All 24 industry group and 484 of the companies in the S&P 500 retreated following the sixth consecutive monthly decrease in retail sales, the longest stretch of declines in records going back to 1992.
Consumer Concern
The loss of 2.6 million jobs and declining home and stock values are squeezing all American households, hurting retailers from Wal-Mart to Macy’s. The figures will serve as a reminder to lawmakers of the urgency to enact President-elect Barack Obama’s stimulus proposals to combat the recession.
The S&P 500 has dropped 5.9 percent in 2009 as companies from Alcoa Inc. to Intel Corp. spurred concern earnings will deteriorate amid the recession, while the unemployment rate in the U.S. climbed to the highest level in almost 16 years.
Wal-Mart, Macy’s and Gap Inc. slid last week after saying earnings will trail analysts’ estimates following the worst holiday season in 40 years.
JPMorgan lost 4.7 percent to $25.11. Macy’s tumbled 3.6 percent to $9.69. American Express fell 3.5 percent to $18.32.
Citigroup slid 74 cents to $5.16. The company may sell its CitiFinancial consumer-lending unit and rein in trading with the bank’s own capital after agreeing to cede control of its Smith Barney retail brokerage to Morgan Stanley, people familiar with the plan said.
European Banks
Banks led declines in Europe after Deutsche Bank reported a fourth-quarter loss after taxes of about 4.8 billion euros ($6.3 billion) as the global financial crisis hurt debt and equity trading. HSBC Holdings Plc, Europe’s largest bank by market value, may have to raise as much as $30 billion and cut its dividend in the half as earnings sink, Morgan Stanley analysts said.
U.S. stocks gained yesterday for the first time in three sessions as a rebound in oil prices lifted energy producers and improving credit markets boosted banks.
The S&P 500’s valuation slid to less than 15.5 times reported earnings yesterday, the cheapest since 1991. The index traded at 11.8 times its companies’ estimated profits over the next 12 months, compared with a 2008 low of 9.8 on Nov. 21, when the S&P 500 began its rebound from an 11-year low.
H.J. Heinz Co. slipped 3.4 percent to $35.15. The world’s largest ketchup maker was cut to “market perform” from “outperform” at Sanford C. Bernstein & Co., which said 2010 earnings may be hurt by currency swings.
Blackstone Group LP, the world’s largest private-equity firm, fell 5.6 percent to $5.78 after it was cut to “underweight” from “overweight” by Barclays Plc. The brokerage also downgraded Fortress Investment Group LLC, a private-equity and hedge-fund manager, to “equal weight” from “overweight.” Fortress lost 5.1 percent to $1.66.
Bunge Ltd. dropped $7.56, or 16 percent, to $40.61. The world’s biggest oilseed processor said earnings last year trailed its forecast because of weaker demand for soybean meal and declining grain prices that prompted farmers to delay sales.
Archer Daniels Midland Co., the world’s largest grain processor, dropped $2.98, or 11 percent, to $24.90.
Allergan Inc. added 69 cents, or 1.7 percent, to $40.27. The company that invented Botox will unveil at the end of this month the eyelash-enhancing drug Latisse, the New York Times reported.
