U.S. Stocks Fall as Consumer Credit, Greece Spur Concern

Share Business ExchangeTwitterFacebook| Email | Print |A A A

By Whitney Kisling

April 7 (Bloomberg) -- U.S. stocks tumbled, with benchmarkindexes slumping the most since February, as a bigger-than-estimated decrease in consumer credit and concern Greece maydefault fueled concern the economic rebound may slow.

Occidental Petroleum Corp. helped lead declines in 37 of 40Standard & Poor’s 500 Index energy companies as oil slipped fromthe highest level since October 2008 on bigger-than-forecastgrowth in inventories. Visa Inc. and American Express Co. lostat least 1.7 percent after the Federal Reserve said consumerborrowing fell by $11.5 billion in February, indicatingAmericans are reluctant to take on more debt.

The S&P 500 lost 0.6 percent to 1,182.45 at 4:10 p.m. inNew York, retreating from an 18-month high. The Dow JonesIndustrial Average sank 72.47 points, or 0.7 percent, to10,897.52. About three stocks fell for every two that rose onU.S. exchanges.

“There’s a lot of back-and-forth news, and we’re in aprecarious position here,” said Jason Pride, director ofinvestment strategy at Glenmede in Philadelphia, which manages$18 billion. “The market on the whole is feeling very uncertainabout this environment.”

Equities extended declines after Federal Reserve ChairmanBen S. Bernanke, speaking in Dallas, omitted a reference toholding interest rates lower for an extended period. Stocks hadbriefly pared losses earlier after a $21 billion offering of 10-year Treasury notes, which influence rates on consumer andcommercial loans. The notes drew a lower-than-estimated yield of3.9 percent and a measure of demand was the strongest since1994.

‘Extended Period’

Most U.S. stocks rose yesterday, led by banks, as investorsbet that the Fed will keep its benchmark interest rate at arecord low for an “extended period” to safeguard the economicrecovery and lenders rallied on analyst upgrades.

Bernanke didn’t mention the plans to keep rates low in hisspeech today from Dallas. On the economy, he said joblessness,home foreclosures and weak lending to small businesses posechallenges to the world’s largest economy as it recovers.

“We are far from being out of the woods,” he said.

Stocks also fell as concern grew that Greece may default onits debt as it struggles to fund the European Union’s largestbudget deficit.

The extra yield, or spread, between Greek 10-year bonds andbenchmark German bunds widened to 405 basis points today, themost since the introduction of the euro in 1999.

‘Sovereign Concerns’

“There’s also still a lot of sovereign concerns outthere,” said David Lutz, managing director of equity trading atStifel Nicolaus & Co. in Baltimore. “Greece’s borrowing costshave jumped.”

More than three-quarters of stocks in the S&P 500 are“overbought” as of the April 5 close, according to BespokeInvestment Group LLC, which identified shares that are at leastone standard deviation above their average price over the past50 days. That reading is the highest since the bull market beganin March 2009 and indicates equities may see “short-termlosses,” Harrison, New York-based Bespoke said in a note toclients.

“We’re in a buying stampede, and it’s pretty rare to havethem go much more beyond this,” said Jeffrey Saut, the chiefinvestment strategist at Raymond James & Associates, whichmanages $230 billion in St. Petersburg, Florida. “Things arepretty overbought here on a short-term basis. I’m still prettyperky on stocks even though I’m cautious near-term.”

Oil Supply

S&P 500 energy shares lost 1 percent as a group, as crudeoil fell 1.1 percent to below $86 a barrel. A government reporttoday showed U.S. inventories climbed for a 10th week, thelongest stretch of increases in five years. Occidental Petroleumretreated 2.5 percent to $86.30.

Massey Energy Co. slid the most in the S&P 500, losing 6.7percent to extend its 11 percent decline from yesterday after anApril 5 mine explosion killed 25 people in West Virginia. Themine is among sites where Massey, the largest coal producer inCentral Appalachia, disputed U.S. findings of safety violations,records show. The U.S. Mine Safety and Health Administration hasissued more than $900,000 in fines for the Upper Big Branch minein the past year, according to federal data.

Visa, the world’s biggest payments network, slid 1.8percent to $90.71 and credit-card issuer American Express Co.sank 1.7 percent to $42.37. The decline in the Fed’s measure ofcredit card debt and non-revolving loans was worse than thelowest estimate in a Bloomberg survey of 34 economists.

Rating Cut

Las Vegas Sands Corp., the casino operator expanding inMacau and Singapore, slid 2.1 percent to $22.93 after it was cutto “neutral” from “buy” at UBS. The shares, which have risen57 percent in 2010 before today, would be more attractive at alower price, UBS said.

AMB Property Corp. said first-quarter earnings, excludingsome items, probably were 30 cents a share at most. That’s lessthan the average analyst estimate in a Bloomberg survey. Theshares declined 3.9 percent to $27.53.

Netflix Inc. slumped 4.4 percent to $79.73 after BarclaysCapital downgraded the shares to “equalweight” from“overweight.”

Advanced Micro Devices climbed 3.3 percent to $9.66 afterUBS AG raised earnings estimates and moved the share-pricetarget up to $13 from $12.

EOG Resources Inc., which produces natural gas and oil,climbed 6.5 percent to $103.74 after saying output will riseabout 20 percent in both 2011 and 2012. The advance was thesecond-biggest in the S&P 500.

S&P 500 companies will post first-quarter profit growth of30 percent, according to estimates compiled by Bloomberg. AlcoaInc. will mark the unofficial start of the first-quarterearnings season when it reports results on April 12.

Two of the biggest retreats in the last 13 months haveoccurred during earnings seasons. The S&P 500 dropped 3.9percent in the week ended Jan. 22 and 4 percent in the period toOct. 30, data compiled by Bloomberg show. Investors who boughtafter those dips were rewarded with gains of more than 10percent within two months, the data show.

To contact the reporter on this story:Whitney Kisling in New York at [e-mail].

Last Updated: April 7, 2010 16:41 EDT