BLBG: U.S. Stocks Drop as Retail Sales Fall, Commodities Tumble
U.S. stocks fell, dragging the Standard & Poor’s 500 Index down from a record, as government data showed retail sales unexpectedly fell in March, commodities plunged and a gauge of consumer sentiment slipped.
Newmont Mining Corp. and Newfield Exploration Co. slumped at least 4.6 percent as oil and metals prices plunged. Banks (SPXL2) fell 1.6 percent as Wells Fargo & Co. reported a drop in revenue and M&T Bank Corp. delayed its planned purchase of Hudson City Bancorp. Harris Corp. slid 6 percent after forecasting sales that missed analysts’ estimates. Biogen Idec Inc. climbed 4 percent after Bank of America Corp. raised the stock’s rating.
The S&P 500 retreated 0.6 percent to 1,583.38 at 11:29 a.m. in New York. The Dow Jones Industrial Average dropped 39.26 points, or 0.3 percent, to 14,825.88. The benchmark indexes closed at all-time highs yesterday as retailers rose and jobless claims fell more than estimated. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.
“We’ve seen this market go up quite a bit,” Terry L. Morris, who helps oversee about $2.6 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. “A lot of investors are cautious at this point and are quick to sell on any kind of signs of a slowdown.”
The 0.4 percent decrease in U.S. retail sales, the biggest since June, followed a 1 percent gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading in March. Department stores and electronics dealers were among the weakest showings.
Consumer Confidence
The Thomson Reuters/University of Michigan preliminary sentiment index for April fell to 72.3 from 78.6 in March. No change was projected for this month’s reading compared with March, according to the median estimate of 69 economists surveyed by Bloomberg.
Companies in the U.S. added to inventories in February at the slowest pace in eight months, a separate Commerce Department report showed, putting them in a better position to deal with a subsequent slowdown in demand.
Euro-area finance ministers met in Dublin today, discussing loan extensions for Ireland and Portugal. Cyprus President Nicos Anastasiades will seek an increase to the nation’s 10 billion- euro ($13 billion) bailout from the European Union, according to a government official, who asked not to be identified.
Bull Market
The bull market in U.S. equities entered its fifth year last month. The S&P 500 has surged 134 percent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy.
Investors will be watching corporate earnings in the weeks ahead to help gauge the health of the economy. Profits at S&P 500 companies dropped 1.4 percent in the first three months of the year, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.
The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, rose 5.6 percent to 12.93 today. The gauge, known as the VIX, is down 28 percent this year and reached its lowest level since February 2007 last week.
Nineteen out of the 24 industries in the S&P 500 declined today, led by banks, even as Wells Fargo (WFC) and JPMorgan Chase & Co. (JPM) posted results that topped analyst estimates.
Bank Earnings
Wells Fargo dropped 1.8 percent to $36.82. The largest U.S. home lender posted a 22 percent rise in first-quarter profit that beat forecasts as the bank curbed expense growth. Revenue, mortgage banking income and lending margins fell.
JPMorgan fell 0.6 percent to $49.01. First-quarter profit rose 33 percent as improving consumer credit quality allowed the bank to cut loan-loss reserves by $1.2 billion. While mortgage volume jumped 37 percent, mortgage-banking net income dropped 31 percent. The largest U.S. bank by assets said 2013 net interest income will be 1 percent lower than the year-earlier period.
“They beat, but it’s kind of a low quality beat,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages $120 billion. “What these companies need to see is better economic growth and with that an increase in longer term interest rates. We’re not seeing that yet.”
Delayed Merger
M&T Bank fell 4 percent to $100.93. The lender said a Federal Reserve review of its compliance with money-laundering rules has delayed its planned purchase of Hudson City. Shares of Hudson City dropped 5.1 percent to $8.32.
Energy and raw-materials companies in the S&P 500 (SPX) tumbled more than 1.6 percent as commodities headed for the worst drop since November. Gold slumped more than 4 percent to below $1,500 an ounce and crude oil lost more than 3 percent. Newmont Mining dropped 5.4 percent to $36.85 while Newfield Exploration fell 5.2 percent to $21.46. Cliffs Natural Resources Inc. declined 4.1 percent to $19.11.
Harris plunged 5.3 percent to $44.10 as the maker of military radios said in a statement it expects third-quarter sales of about $1.2 billion, missing the average analyst estimate of $1.32 billion. Earnings from continuing operations will be $1.12 per share, Harris said, compared with the $1.26 projected by analysts in a Bloomberg survey.
Biogen Idec (BIIB) advanced 3.4 percent to $206.99. The biotechnology company was boosted to buy from neutral at Bank of America Corp. Ashland Inc. advanced 7.6 percent to $84.79. Activist investor Jana Partners LLC revealed it acquired a 7.4 percent stake in the biggest producer of specialty papermaking chemicals and has spoken to management.
To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Lindsey Rupp in New York at lrupp2@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
