U.S. stocks retreated, with the Standard & Poor's 500 Index poised for the lowest close in a month, as jobless claims increased to the highest level since November and an index of Philadelphia-area manufacturing fell.
U.S. stocks retreated, with the Standard & Poor’s 500 Index poised for the lowest close in a month, as jobless claims increased to the highest level since November and an index of Philadelphia-area manufacturing fell.
Alcoa Inc., General Electric Co. and 3M Co. lost at least 2.6 percent to help lead declines in the largest U.S. companies. Intel Corp. slumped 3.2 percent after agreeing to purchase McAfee Inc. for about $7.68 billion, while the security-software company rose 57 percent. Sears Holdings Corp. dropped 8.1 percent after the largest U.S. department-store chain reported sales that trailed analysts’ estimates.
The S&P 500 fell 1.4 percent to 1,078.63 as of 3:21 p.m. in New York, the lowest since July 21 on a closing basis. The Dow Jones Industrial Average declined 126.2 points, or 1.2 percent, to 10,289.3, as 29 of its 30 stocks slumped. About six stocks retreated for each that advanced on U.S. exchanges.
“People are frustrated,” said Philip Dow, director of equity strategy at Minneapolis-based RBC Wealth Management, which oversees $164 billion. “The economic numbers are coming in weaker than expected, even as corporate profits are stronger. Investors looking at the economy are wondering, ‘Why should I own stocks?’”
The S&P 500 fell 10 percent from its 2010 high on April 23 through yesterday as concerns have arisen that the economy is weakening. The gauge retreated 3.8 percent last week after the Federal Reserve said the pace of recovery will probably be “more modest” than previously forecast.
Economy Watch
Stocks opened lower this morning after a Labor Department report showed that initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14. Claims exceeded all estimates of economists surveyed by Bloomberg News and compared with the median forecast of 478,000. The number of people receiving unemployment insurance fell, while those getting extended benefits increased.
Losses accelerated after the Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
‘Sluggish Recovery’
“We’re in a sluggish recovery,” said Hank Smith, chief investment officer at Haverford Trust Co., which manages $6.2 billion in Radnor, Pennsylvania. “We need to see improvement in the employment picture to call this recovery sustainable.”
All 10 industry groups in the S&P 500 fell at least 1 percent, with industrial companies and raw-materials producers leading the declines.
Alcoa declined 3.2 percent to $10.59. General Electric lost 3.6 percent to $15.13. 3M slid 2.6 percent to $81.41.
Sears slumped 8.1 percent to $61.81, the biggest decline in the S&P 500. The largest U.S. department-store chain said its second-quarter sales fell less than 1 percent to $10.5 billion, trailing the $10.6 billion average of estimates compiled by Bloomberg.
Staples Inc. declined 3.3 percent to $19. The world’s largest office-supply retailer forecast third-quarter profit excluding some items of 39 cents to 41 cents a share, less than the 44-cent average estimate from 17 analysts in a Bloomberg survey.
GameStop, Intel
GameStop Corp. fell 7.6 percent to $19.18. The entertainment software retailer reported second-quarter sales and profit that trailed the average analyst estimate in a Bloomberg survey and made a third-quarter profit forecast that also fell short.
Intel had the second-biggest decline in the Dow, sliding 3.2 percent to $18.96. The largest chipmaker agreed to buy McAfee for $7.68 billion, its biggest-ever acquisition, adding security software to its chips business. McAfee investors will receive $48 a share in cash. That’s 60 percent more than McAfee’s close yesterday. McAfee surged 57 percent to $47.04.
Takeover speculation helped spur gains in stocks earlier this week, with BHP Billiton Ltd’s $40 billion offer for Potash Corp. of Saskatchewan triggering a rally in fertilizer makers and investors betting that homebuilders and U.S. Steel Corp. will also receive bids. Global announced deals have totaled $1.27 trillion so far in 2010, up 21 percent from the same time last year, according to data compiled by Bloomberg.
‘More M&A’
“There’s more M&A going on and I’d expect that to continue,” said Cliff Remily, a money manager at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees $61 billion. “Stock prices are still low, balance sheets are strong, cash flow is strong. There’s a lot of cash in health care and technology sectors. Whenever there’s cash, there’s a temptation for management to spend it.”
U.S. stock-index futures and European shares rose earlier today after the Bundesbank raised its growth forecast for Germany this year as the economy expanded at the fastest pace in two decades in the second quarter. Gross domestic product will increase by about 3 percent in 2010, the German central bank said in its monthly bulletin, lifting its forecast from the 1.9 percent it predicted in June.
The Stoxx Europe 600 Index erased gains after the U.S. economic data, closing down 1.4 percent to a one-month low.
