BLBG: U.S. Stocks Fluctuate as Insurers Gain, Commodity Shares Drop
U.S. stocks drifted between gains and losses as declines in commodity producers snuffed out an early advance spurred by a takeover in the homebuilding industry and speculation the government will bail out life insurers.
Energy shares were the biggest drag on the Standard & Poor’s 500 Index as oil slid for a fourth day following a report showing an increase in inventories. Centex Corp. climbed 20 percent as Pulte Homes Inc. said it will buy the company to create the nation’s largest homebuilder. Hartford Financial Services Group Inc. and MetLife Inc. rallied as the Treasury said life insurers will be reviewed for possible bailout funds.
The Standard & Poor’s 500 Index added 0.2 percent to 817.45 at 10:54 a.m. in New York. The Dow Jones Industrial Average lost 2.95 points, or less than 0.1 percent, to 7,786.61. The MSCI World Index of 23 developed nations slipped 0.4 percent.
“It’s going to be a rollercoaster over the next few weeks,” said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees about $200 billion. “It’s going to be a question of which companies are announcing earnings and if they were better or worse than expected.”
Stocks slid for a second day yesterday as investors from George Soros to Marc Faber predicted the rebound in equities will falter as the market braced for a seventh straight quarter of declining earnings.
Energy Slump
Chevron Corp., the second-largest U.S. oil company, fell 56 cents to $67.84 and helped lead S&P 500 energy shares to a 0.7 percent decline. Crude for May delivery lost 42 cents to $48.73 a barrel in New York.
ConocoPhillips slipped 2.1 percent to $38.84. The company is unlikely to increase oil and natural gas production over the next five years, according to UBS analysts, who downgraded the stock to “neutral” from “buy.”
Centex jumped 20 percent to $9.17. Based on the closing price of Pulte stock on April 7, 2009, the transaction has a value of $10.50 per Centex share, representing a premium of 32.6 percent to the 20-day volume weighted average trading price of Centex’s shares.
Hartford Financial rallied 23 percent and MetLife climbed as much as 12 percent. The U.S. Treasury said life insurers that have bank or thrift holding companies are eligible for capital infusions, and applications are under review.
“There are a number of life insurers who met the requirements for the Capital Purchase Program because of their thrift or bank holding company status,” Treasury spokesman Andrew Williams said today in a statement in Washington.
Bed Bath & Beyond Beats
Bed Bath & Beyond Inc. rose the most in nine years, climbing 22 percent to $31.16, after the largest U.S. home- furnishings retailer said fourth-quarter profit fell less than some analysts estimated.
Mosaic Co. slumped 4.6 percent to $40.95. North America’s second-biggest fertilizer maker posted an 89 percent decline in fiscal third-quarter profit as farmers delayed purchases of phosphate and potash crop nutrients.
Profits at S&P 500 companies probably fell 37 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of seven straight declines in earnings is the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.
Earnings Watch
U.S. earnings may drop 31 percent in the second quarter and 18 percent in the next before gaining 76 percent in the last three months of the year, analysts predict. Banks are projected to account for all of the rebound in the final three months of the year. Without financial companies, the gain turns into a 4.5 percent decline, the data show.
The S&P 500 and the Dow average have surged at least 19 percent since reaching the lowest levels in a dozen years on March 9 as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of the year and Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.
The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the recession persists, Aberdeen Asset Management Plc’s Hugh Young said in a Bloomberg Television interview.
A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.
The Congressional Oversight Panel, in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings.
