BLBG: Stocks Decline as Investors Weigh Greek Deal
U.S. stocks declined, a day after the Standard & Poor’s 500 Index advanced to a seven-month high, as investors weighed an agreement by Greek political leaders on measures needed to secure international rescue funds.
Cisco Systems Inc. (CSCO), the biggest maker of networking equipment, fell 2.2 percent on a revenue forecast. Groupon Inc., the largest daily-deal site, tumbled 11 percent after reporting an unexpected tax-related loss. Visa Inc. (V), the biggest payments network, rose 4.4 percent as profit soared. Akamai Technologies Inc. (AKAM), the operator of a server network that lets businesses speed data delivery, surged 11 percent as sales beat estimates.
The S&P 500 decreased 0.3 percent to 1,345.91 as of 10:40 a.m. New York time. The Dow Jones Industrial Average declined 24.82 points, or 0.2 percent, to 12,859.13 today.
“The market is very, very tenuous,” Michael Crofton, chief executive officer at Philadelphia Trust Co., said in a telephone interview. His firm manages about $1.7 billion. “Austerity is the opposite of growth. Austerity could force Greece into a depression, which would force them back to the table to ask for more aid. The ECB is caught between a rock and a hard place. They need to play their cards close to the vest until they are sure this quasi-solution for Greece will stick.”
Greece’s government reached a deal on austerity measures required for a 130 billion-euro ($173 billion) financing package, according to an e-mailed statement from the Greek Prime Minister’s press office. European Central Bank President Mario Draghi signaled the economic outlook has improved, suggesting policy makers may be less inclined to add to stimulus as Greece reached agreement on austerity measures to secure a bailout.
Bull Market
Benchmark gauges followed global shares higher yesterday as the MSCI All-Country World Index gained 20 percent from its October low, meeting the definition of a bull market. The S&P 500 (SPX) yesterday closed 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.3 percent this year through yesterday amid better-than-expected economic data and corporate profits.
Cisco slumped 2.2 percent to $19.98. The company predicted a third-quarter revenue gain of 5 percent to 7 percent. That equates to about $11.4 billion to $11.6 billion, compared with an average estimate of $11.5 billion. Excluding some costs, earnings will be 45 cents to 47 cents a share. Analysts had projected 45 cents.
Groupon tumbled 11 percent to $21.82. The company has expanded to 47 countries and set up a new international headquarters in Switzerland. That contributed to a higher-than- expected $34.8 million in taxes, Chief Financial Officer Jason Child said.
Job Cuts
PepsiCo Inc. (PEP) dropped 4.3 percent to $63.88. The company plans to cut 8,700 jobs and boost marketing spending for its brands by as much as $600 million as Chief Executive Officer Indra Nooyi works to turn around the world’s largest snack-food maker.
Visa rallied 4.4 percent to $113.11. Chairman and Chief Executive Officer Joseph W. Saunders is positioning Visa for its next phase of growth after U.S. regulators capped so-called swipe fees, or interchange, that the company charges merchants for debit-card purchases. Visa, which derived about 56 percent of revenue from the U.S. in fiscal 2011, has said it intends to generate more than half from markets abroad by 2015.
Akamai jumped 11 percent to $38.29. The company, whose customers include Apple Inc. (AAPL), is benefiting from rising demand for its services as companies seek ways to push data-heavy digital content, such as videos, around the world more quickly. A surge in Web shopping bolstered Akamai’s results during the holiday season, said Mark Kelleher, an analyst at Dougherty & Co. in Boston.
‘Dangerous’
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said low interest rates and inflation should dissuade investors from buying bonds and other holdings tied to currencies.
“They are among the most dangerous of assets,” Buffett said in an adaptation of his annual letter to shareholders that appeared today on Fortune magazine’s website. “Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal.”
Buffett, 81, who built Omaha, Nebraska-based Berkshire from a failing textile maker into a firm selling insurance, energy and jewelry through acquisitions and stock picks, echoes Laurence D. Fink, chief executive officer of BlackRock Inc. Fink said this week that investors should be 100 percent in equities, because of depressed stock valuations and the Federal Reserve’s pledge to keep interest rates low.
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
