BLBG: U.S. Stocks Decline Amid Disappointing Economic Reports
U.S. stocks declined, sending the Standard & Poor’s 500 Index down for a second straight day, after a gauge of Philadelphia-area manufacturing unexpectedly fell while housing and jobless claims reports disappointed.
Commodity shares in the S&P 500 slid as data showed China’s manufacturing may shrink. Bed Bath & Beyond Inc. tumbled 15 percent as its earnings forecast trailed estimates. Red Hat Inc., the largest seller of the open-source Linux operating system, slumped 5.3 percent as billings missed some projections. ConAgra Foods Inc. added 3.4 percent as the maker of Hebrew National hot dogs forecast profit that beat estimates.
The S&P 500 fell 0.9 percent to 1,343.98 at 11:14 a.m. in New York. The Dow Jones Industrial Average lost 78.64 points, or 0.6 percent, to 12,745.75. Trading in S&P 500 companies was down 7.8 percent from the 30-day average at this time of day.
“It’s a wait-and-see mode,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management. He spoke in a telephone interview. “That doesn’t promote strong markets either way. We’re still moving forward, yet the economy has lost momentum.”
Data showed manufacturing in the Philadelphia region shrank in June at the fastest pace in almost a year, indicating the economic slowdown is holding factories back. Sales of previously owned U.S. homes declined in May, while more Americans than forecast filed applications for unemployment benefits last week.
The Federal Reserve yesterday cut its estimates for growth amid a slowdown in hiring. Chairman Ben S. Bernanke is signaling the Fed will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans.
Biggest Losses
Nine out of 10 groups in the S&P 500 retreated as commodity, consumer discretionary and technology shares had the biggest losses. The Morgan Stanley Cyclical Index of companies which are most-dependent on economic growth lost 1.4 percent.
Measures of energy and raw material producers in the S&P 500 lost at least 1.4 percent. China’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.
Alcoa Inc., the largest U.S. aluminum producer, dropped 2.2 percent to $8.73. Halliburton Co., the largest provider of hydraulic-fracturing services, decreased 2.8 percent to $28.74.
Bed Bath & Beyond declined 15 percent, the most ever on a closing basis, to $63.43. It said comparable-store sales in the first quarter rose 3 percent compared with 7 percent a year earlier. Analysts projected a gain of 3.8 percent, the average of five estimates compiled by Bloomberg.
Red Hat
Red Hat dropped 5.3 percent to $53.53. Billings, a predictor of revenue, were $310 million in the quarter ended May 31, falling short of the $319 million average analyst estimate, said Abhey Lamba, an analyst at Mizuho Securities USA Inc. Billings increased 16 percent from a year earlier, while analysts predicted 20 percent growth on average, according to Morgan Stanley.
Celgene Corp. fell 12 percent to $59.26. It withdrew its application in Europe to expand regulatory approval of Revlimid as a first option and maintenance therapy for patients with a deadly blood cancer.
Micron Technology Inc. retreated 4.9 percent to $5.82. The largest U.S. maker of computer memory reported a fourth consecutive quarterly loss after prices fell for chips used to store data in phones and tablets, crimping sales.
ConAgra Jumps
ConAgra jumped 3.4 percent, the most in the S&P 500, to $25.43. The company forecast fiscal year 2013 earnings of at least $1.95 a share. On average, the analysts surveyed by Bloomberg estimated profit of $1.92 a share.
Onyx Pharmaceuticals Inc. surged 40 percent to $62.35, the highest level on record. The company won support from a U.S. advisory panel for its drug to treat a deadly blood cancer that affects 50,000 Americans.
Facebook Inc. added 1.4 percent to $32.03. The social- network operator’s 22 percent rally in two weeks through yesterday has helped the company avoid posting the biggest slump among the largest U.S. initial public offerings since the start of 2011.
Facebook, which set a record for technology companies by raising $16 billion last month, has unveiled new products and services after the shares tumbled to a low of $25.87 on June 5. PetroLogistics LP dropped 20.4 percent in its first month of trading, or 3.1 percentage points more than Facebook, giving the propylene maker the worst return among the 30 largest IPOs since the beginning of last year, data compiled by Bloomberg show.
Concern Facebook was overvalued and that the company will struggle to increase revenue fast enough pushed the stock down as much as 32 percent from its IPO price of $38 on May 17.
Real Time
Since the shares bottomed earlier this month, Facebook introduced a real-time bidding platform to better target ads to consumers and ComScore Inc. released research that showed marketing on the social network is effective.
“Investors are starting to come around to see the significant opportunity of the Facebook platform,” Victor Anthony, a New York-based analyst at Topeka Capital Markets Inc., said in a telephone interview. He has a buy rating on the stock. “It was a botched IPO process but ultimately, the underwriters did their job. If the stock increasingly marches up, all the concerns will be tapered down.”
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
