BLBG: U.S. Stocks Little Changed as Investors Weigh Europe Vote
U.S. stocks were little changed, following the biggest weekly slump in 2012, as investors weighed Francois Hollande’s election as France’s president and Greek voters flocking to anti-bailout parties.
Financial shares in the Standard & Poor’s 500 Index rose with Bank of America Corp. (BAC) rallying 2.3 percent. Walt Disney Co. (DIS) advanced 1.2 percent as the movie “Marvel’s The Avengers” earned a record $200.3 million in its opening weekend. American International Group Inc. (AIG) fell 6.2 percent as the U.S. Treasury Department agreed to sell $5 billion of shares, with the insurer buying $2 billion of the total.
The S&P 500 slid 0.1 percent to 1,368.38 at 9:45 a.m. New York time. The benchmark measure for U.S. equities fell 2.4 percent last week. The Dow Jones Industrial Average decreased 34.66 points, or 0.3 percent, to 13,003.61.
“There are still many hurdles in Europe,” Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati, said in a telephone interview. “There are no easy answers and the electorate is rejecting austerity. People will take a renewed focus on Europe and that focus is not positive.”
Equities were little changed as French Socialist Hollande, who defeated Nicolas Sarkozy, pledged to push for less austerity. His victory may sharpen tensions with key allies with Hollande advocating a more aggressive European Central Bank role. In Greece, the poll cast doubt on whether the two main parties can put together a government strong enough to implement spending cuts.
Little Room
European stocks rebounded as investors said the new French government will have little room to undo European fiscal accords. Economists at Exane BNP Paribas said the outcome of the Greek elections was more worrisome for markets than France’s as it may prompt the southern European nation to neglect commitments and trigger speculation it will exit the euro zone.
“Given the importance of the extreme votes, the next government, whatever its composition, will try to renegotiate the terms” of the European Union and International Monetary Fund bailouts, Exane economists Pierre-Olivier Beffy and Amelie de Montchalin wrote in a report on Greece today. “Given the backdrop of rising social unrest and the expected talks on the austerity programme, markets will certainly again price in the risks of Greece leaving the euro zone.”
A reduction in austerity could put more pressure on the ECB to act, according to David R. Kotok, Cumberland Advisors’ chairman and chief investment officer.
‘Monetary Ease’
“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.”
The S&P 500 (SPX) dropped the most since December last week as a report showed U.S. employers added fewer jobs than forecast and Spain entered a recession. The gauge is 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.
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
