U.S. Stocks Fall as Spanish Debt Overshadows Economy

By Rita Nazareth – May 25, 2012 7:30 PM GMT+0100

http://www.bloomberg.com/news/2012-05-25/u-s-stock-futures-drop-on-concern-over-spanish-debt.html

U.S. stocks fell, snapping a four-day rally in the Standard & Poor’s 500 Index, as concern about Spain’s finances tempered optimism with data showing American consumer confidence rose to the highest since 2007.

Commodity, industrial and financial shares had the biggest losses in the S&P 500 among 10 groups. Boeing Co. (BA), JPMorgan Chase & Co. (JPM) and Chevron Corp. (CVX) slid at least 1.2 percent. Facebook Inc. (FB) slid 4.5 percent, following a two-day gain.

The S&P 500 fell 0.1 percent to 1,318.98 at 2:29 p.m. New York time. The benchmark gauge for U.S. equities is up 1.8 percent since May 18 and poised for the biggest weekly rally since March. The Dow Jones Industrial Average fell 65.77 points, or 0.5 percent, to 12,463.98. Trading in S&P 500 companies was down 29 percent from the 30-day average at this time of day. The U.S. stock market will be closed on May 28 for a holiday.

“It’s a good story that’s getting completely masked over by this European ineptitude,” said Rick Fier, director of equity trading at Conifer Securities LLC in New York. His firm oversees more than $12 billion. “America is doing great. Europe is a real disaster. Their economies are completely going into the toilet. Where it ends? Who knows.”

The euro touched a 22-month low as Deputy Prime Minister Soraya Saenz de Santamaria said Spain’s government is analyzing “with all caution” requests from regional governments to help them regain access to capital markets. Catalonia’s government said it is complying “strictly” with its budget program and will honor its commitments. In the U.S., the Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 79.3 in May, beating estimates.
$1 Trillion

More than $1 trillion was erased from U.S. equity values this month amid uncertainties over Greece’s permanence in the euro. The S&P 500 fell as much as 8.7 percent from an almost four-year high and is headed for a monthly decline.

“People are wondering if there are other skeletons in Spain’s regional government closets,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.68 trillion. “Greece is critical, but relatively small in the euro zone. The same cannot be said of Spain.”

Investors are reluctant to take risk even as the U.S. stock market looks attractive, said Mark Lehmann, president of JMP Securities. The S&P 500 trades at 13.3 times reported earnings, below the average since 1954 of 16.4, according to data compiled by Bloomberg. About 71 percent of companies in the benchmark index which reported first-quarter results beat estimates.

“It’s very vanilla right now,” Lehmann said in a telephone interview from San Francisco. “I don’t think there’s anybody getting wildly bullish or wildly bearish. The U.S. economy is in better shape, corporate balance-sheets are in better shape. Yet the fear of the unknown is taking over. Nobody is panicking, yet nobody is taking a lot of risk.”

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