By Rita Nazareth – Oct 28, 2011
Most U.S. stocks fell as data on consumer confidence and spending failed to boost equities a day after European leaders expanded the region’s bailout plan.
Stocks pared losses in the final minutes of trading, with the Standard & Poor’s 500 Index erasing a decline as it completed a fourth straight weekly advance, the longest streak since January. Whirlpool Corp. (WHR), the world’s largest maker of household appliances, slumped 14 percent after saying it will cut more than 5,000 jobs. Hewlett-Packard Co. (HPQ) rose 3.5 percent on plans to keep its personal-computer business.
About four stocks declined for every three that rose on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose less than 0.1 percent to 1,285.09, after rallying 3.4 percent yesterday. It was up 3.8 percent since Oct. 21. The Dow Jones Industrial Average added 22.56 points, or 0.2 percent, to 12,231.11. The Russell 2000 Index of small companies retreated 0.6 percent. U.S. equity options expired today.
“It’s clearly not the end of the story for Europe,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has more than $116 billion in client assets. “We had a rally yesterday to beat the band. There’s a bit less uncertainty about the position of the Europeans, but there are lots of details that still need to be worked out.”
Stocks rose yesterday, extending the best monthly rally since 1974 for the S&P 500, as European leaders agreed to expand a bailout fund and U.S. economic growth accelerated. Earlier this month, the index came within 1 percent of extending a drop from its peak in April to 20 percent, the common definition of a bear market. Since then, it has risen 17 percent.
The S&P 500 rallied above the average strategist forecast for its closing level on Dec. 31, the third straight year that stocks ran ahead of projections. The index closed above the year-end forecast on Nov. 4 in 2010 and on June 2 in 2009, according to data compiled by Bloomberg.
German Chancellor Angela Merkel said that the debt crisis won’t be over “in a year.” Italy’s borrowing costs rose to a euro-era record at a sale of three-year bonds, driving yields higher amid concern that efforts to contain the sovereign crisis won’t be enough to safeguard the region’s third-largest economy. Fitch Ratings said part of the plan to contain debt turmoil amounts to a Greek default.
European leaders may struggle to maintain the euphoria that drove the euro to its biggest one-day gain in more than a year as scrutiny deepens on their latest attempt to stem the region’s turmoil.
Not Properly Addressed
The weaknesses of Europe’s common currency area, ranging from its design to a persisting dearth of bank funding and anemic economic growth, weren’t properly addressed in the measures revealed yesterday to stem investor panic, said Harvard University economist Kenneth Rogoff and Jonathan Loynes at Capital Economics Ltd. in London.
Consumer confidence unexpectedly rose in October from the previous month, indicating the biggest part of the economy will help keep the U.S. recovery intact. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 60.9 from 59.4 in September. The gauge was projected to drop to 58, according to the median forecast of 66 economists surveyed by Bloomberg News. The preliminary reading for the month was 57.5.
A separate report showed that consumer spending in the U.S. accelerated in September. Still, incomes rose less than projected, sending the savings rate down to the lowest level in almost four years.
“While borrowing and spending is what both monetary and fiscal policy keep encouraging, it is savings that is the fuel for healthy economic growth and investment,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, said in a note to clients. “The decline in the savings rate is not good.”
Whirlpool slumped 14 percent to $51.80. The company’s plan, which also includes reducing factory capacity by 6 million units, will cost $500 million and $160 million will be booked in 2011, Whirlpool said. Profit this year will be in a range of $4.75 to $5.25 a share, down from a previous forecast of $7.25 to $8.25, the company said.
Cablevision Systems Corp. (CVC) tumbled 13 percent to $15.14 after the fifth-largest U.S. cable-TV provider by subscribers said profit declined 65 percent. The company said it boosted spending on programming and on promoting its video, phone and broadband services.
Hewlett-Packard rallied 3.5 percent, the most in the Dow, to $27.94. Chief Executive Officer Meg Whitman is backing away from a spinoff proposal made by former CEO Leo Apotheker, who raised the idea in August as part of a sweeping overhaul. Moody’s Investors Service placed the company’s credit ratings on review for possible downgrade.
DuPont Co. rose 1.3 percent to $49.36 as people with knowledge of the matter said the company is exploring a sale of its auto-paint division that may fetch $3 billion to $4 billion. DuPont hired Credit Suisse Group AG to seek buyers for the division, said the people. Gregg Schmidt, a DuPont spokesman, and a Credit Suisse spokesman declined to comment.
Baidu Inc. jumped 4.5 percent to $144.62. China’s biggest Internet company by market value said third-quarter profit rose 80 percent, beating analysts’ estimates, as revenue from search- engine advertising surged.
Canadian Pacific Railway Ltd. (CP) rose 4.3 percent to $64.57 as of 4 p.m. New York time and then surged as much as 9.9 percent to $70.95 in after-hours trading. Following the close of U.S. exchanges, Pershing Square Capital Management LP, the activist hedge fund run by Bill Ackman, disclosed that it bought the equivalent of a 12.2 percent stake in the railroad.
The hedge fund said it bought 1.67 million shares for $63.52 each today. The stock didn’t trade at that level until 3:53 p.m., according to data compiled by Bloomberg. More than 1.46 million Canadian Pacific shares traded in the U.S. between 3:50 p.m. and 4 p.m., the data show.