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(BN) Most U.S. Stocks Fall as World Bank Forecast Offsets Apple Rally
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Most U.S. Stocks Fall as World Bank Forecast Offsets Apple Rally
2013-01-16 21:53:48.518 GMT
By Rita Nazareth and Sarah Pringle
Jan. 16 (Bloomberg) -- Most U.S. stocks fell, following
yesterday’s gain, as a cut in the World Bank’s growth forecasts
offset a rally in Apple Inc. as investors watched earnings.
Boeing Co. slumped 3.4 percent as All Nippon Airways Co.
and Japan Airlines Co., the world’s largest users of the 787
jets, grounded their entire fleet of Dreamliners. Custody banks
Bank of New York Mellon Corp. and Northern Trust Corp. dropped
at least 2.7 percent. Apple, which slid below $500 a share
yesterday for the first time in 11 months, rallied 4.2 percent
to halt a three-day decline. Goldman Sachs Group Inc. added 4.1
percent after the bank’s profit almost tripled.
Three stocks retreated for every two rising on U.S.
exchanges at 4 p.m. New York time. The Standard & Poor’s 500
Index advanced less than 0.1 percent to 1,472.63. The Dow Jones
Industrial Average declined 23.66 points, or 0.2 percent, to
13,511.23. About 5.6 billion shares changed hands on U.S.
exchanges, or 8.6 percent below the three-month average.
“The cuts in growth forecasts are reminders that there’s
still work to be done,” said Brad Sorensen, director of market
and sector analysis at San Francisco-based Charles Schwab Corp.
His firm has $1.92 trillion in client assets. “In the U.S.,
it’s early to talk about the earnings season, but so far we’re
relatively pleased with what we’ve seen. We’ve had a good start
to the year in stocks. There’s very little doubt that there’s
quite a bit of money on the sidelines that could provide a nice
boost higher.”
World Bank
The World Bank cut its global growth forecast for this year
as austerity measures, high unemployment and low business
confidence weigh on economies in developed nations. German
Chancellor Angela Merkel’s government cut its growth forecast
for Europe’s biggest economy. Luxembourg Prime Minister Jean-
Claude Juncker said the strength of the euro poses a threat to
the region’s economy.
The U.S. economy picked up across much of the country last
month, boosted by auto and home sales, even as the outlook for
unemployment showed few signs of improvement, the Federal
Reserve said. Industrial production in the U.S. climbed for a
second month in December as demand picked up for business
equipment, showing factories expanded even as lawmakers battled
over the federal budget.
Besides JPMorgan and Goldman Sachs, nine other companies in
the S&P 500 were scheduled to report results today. Almost 75
percent of the 39 S&P 500 companies which reported quarterly
results beat analysts forecasts. Fourth-quarter profits grew 2.5
percent, according to analysts’ estimates compiled by Bloomberg.
That would be the second-slowest quarterly growth since 2009,
the data show.
Index’s Valuation
The S&P 500 has risen 3.3 percent so far this year,
extending 2012’s 13 percent surge. Yet the benchmark gauge is
trading at 14.8 times reported earnings, compared with an
average of 16.5 since 1954, according to data compiled by
Bloomberg.
“On the positive side of the ledger we’ve got at least
what I consider to be undemanding valuations for stocks in
general,” said Norm Conley, chief executive officer at St.
Louis-based J.A. Glynn & Co, which manages about $975 million.
“We’ve got earnings season kicking off here and so far no huge
bad surprise, so that is an incremental positive.”
The Chicago Board Options Exchange Volatility Index, which
measures the cost of using options as insurance against declines
in the S&P 500, lost 1 percent to 13.42. Earlier today, the
gauge fell to the lowest level since 2007.
Boeing Slumps
Boeing slumped 3.4 percent to $74.34. The 747 faces fresh
scrutiny after the Japanese airlines grounded almost half the
world’s Dreamliner fleet for at least two days following an
emergency landing. All Nippon Airways pilots on a domestic
flight got battery-fault warnings and saw smoke in the cockpit,
the U.S. National Transportation Board said today.
The groundings added to the questions plaguing a model that
was targeted for a U.S. assessment because of a Jan. 7 fire in a
lithium-ion battery pack on a Japan Airlines plane in Boston.
BNY Mellon slumped 2.8 percent to $26.04 and Northern Trust
dropped 5.7 percent to $49.78. Both banks have responded to
near-zero interest rates by reducing staff and expenses to
protect profit margins. While the banks benefited from rising
stock prices, which increase fees for overseeing and managing
investor money, low interest rates and slow capital-markets
activity have hurt their ability to expand earnings.
Chipotle Mexican Grill Inc. fell 5.5 percent to $280.94
after reporting preliminary fourth-quarter profit that trailed
analysts’ estimates.
Dell Inc. dropped 4.3 percent to $12.61, after rallying 21
percent over the last two days. The third-largest PC maker is
discussing a leveraged buyout with private-equity firms TPG
Capital and Silver Lake, a person with knowledge of the matter
said this week.
Apple Rebounds
Technology, which comprises the biggest group in the S&P
500, rose the most among 10 industries. Apple rose 4.2 percent
to $506.09, after slumping 7.2 percent over the previous three
days. The company introduced installment payment plans for
buyers of iPhones and MacBook laptops in China as it struggles
to compete with low-cost devices in the world’s largest computer
and mobile-phone market.
Goldman Sachs rose 4.1 percent to $141.09. Chief Executive
Officer Lloyd C. Blankfein, 58, has undertaken a $1.9 billion
expense-reduction effort since mid-2011 and said he expected
earnings growth to resume when the economy and markets improved.
A stock-market rebound and a $500 million profit from selling a
hedge fund-administration unit helped revenue recover from the
lowest first half since 2005.
JPMorgan Chase & Co. gained 1 percent to $46.82. The
largest U.S. bank by assets said fourth-quarter profit rose 53
percent, beating analysts’ estimates as mortgage revenue more
than doubled and the lender set aside less for future losses.
Genworth Financial
Genworth Financial Inc. rallied 8.9 percent to $8.85. The
insurer that named a new chief executive officer this month said
it is reorganizing to separate most of the company from the
mortgage-guaranty operation that saddled the firm with losses.
Smith & Wesson Holding Corp. rose 5.7 percent to $8.91.
Sturm Ruger & Co. added 5 percent to $50.38. President Barack
Obama proposed the most ambitious set of gun control proposals
in decades, calling for a renewal of a ban on assault weapons
and high-capacity ammunition magazines and setting out 23
executive actions he’ll take such as ordering agencies to share
data for background checks and addressing mental health issues.
“These proposals were widely expected to occur today,”
said Rommel Dionisio, analyst at Wedbush Securities based in New
York.
Constellation Brands Inc. added 6.2 percent to $38.65 after
being rated buy in new coverage at Buckingham Research by equity
analyst Alice Longley.
Better Positioned
The Dow is better positioned to set a record now that its
transportation-stock counterpart has done so, according to
Richard Moroney, editor of the Dow Theory Forecasts newsletter.
The Dow Jones Transportation Average has led the Dow industrials
throughout the rally which started in March 2009. Yesterday the
Dow transports closed at 5,639.64, an all-time high. The average
had climbed 6.3 percent for the year, its best performance
through Jan. 15 since 1987.
“It’s a legitimate move,” Moroney, who serves as the
chief investment officer at Horizon Investment Services LLC as
well as the newsletter’s editor, said yesterday in a telephone
interview. “I take it as a positive.”
All 20 companies in the Dow transports had gains for the
year as of yesterday. Delta Air Lines Inc., the world’s second-
largest airline, set the pace by rising 15 percent. Most beat
the Dow industrials’ 3.3 percent advance for 2013 as well.
Fourth-quarter earnings reports will largely determine
whether the industrials reach a record any time soon, according
to Moroney. The average would have to advance 4.7 percent to
surpass its peak of 14,164.53 in October 2007. It’s 0.6 percent
away from beating last year’s high.
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MARKET WATCH 17th Jan 2013
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