U.S. Stocks Retreat as Personal Consumption Trails Economists Estimates
U.S. stocks fell, pulling the Dow Jones Industrial Average down from a 13-month high, as smaller- than-forecast growth in personal spending spurred concern that consumers are struggling to recover from the recession. Financial shares led declines, with JPMorgan Chase & Co. and Bank of America Corp. dropping at least 1.2 percent, after the Federal Deposit Insurance Corp.
said the number of ``problem'' lenders climbed to a 16-year high. Hewlett-Packard Co. slid 1.6 percent after reporting a drop in personal-computer sales. Stocks trimmed losses as Federal Reserve policy makers lowered their unemployment forecast. The Standard & Poor's 500 Index lost 0.1 percent to
1,105.65 at 4:06 p.m. in New York. The Dow fell 17.24 points, or 0.2 percent, to 10,433.71. Fewer than 7 billion shares changed hands on all U.S. exchanges, 23 percent below the
three- month average as trading slowed before the Thanksgiving holiday. ``The stock market is skittish,'' said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. ``We had mixed economic data points, personal spending is not feeling good and the FDIC making comments on problem banks. Those are all reminders that we're still in the process of healing. Investors are reacting accordingly.''
Brazilian Stocks Rise on Tax Cut Speculation, Pulp Outlook; Real Declines
Brazilian stocks rose for a second day on speculation the government may announce tax cuts for industries ranging from cars to furniture to bolster sales as an improving outlook for pulp prices sent producers higher. Duratex SA, which makes bathroom fittings and wood panels, jumped to a record after a Brazilian newspaper reported that the government may cut taxes on furniture sales to bolster demand. Lojas Americanas SA, Brazil's biggest discount retailer, rose 3.9 percent after UBS AG said it was one of its preferred stocks in the industry.
Fibria SA, the world's biggest supplier to paper companies, led gains on the Bovespa index on the outlook for higher pulp prices next year. ``You haven't been getting much bad news about the domestic economy,'' Fabio Cardoso, a partner at Adinvest Consultoria, a Rio de Janeiro-based consultancy and fund management firm. ``There's global liquidity and we continue to be a good destination for it.'' The Bovespa stock index gained in the last hour of trade, rising 0.8 percent to 67,317. Thirty-nine stocks fell on the index, while 22 rose.
The BM&FBovespa Small Cap Index gained 0.3 percent. The real added 0.3 percent to 1.7312 per dollar. In other Latin American markets, Mexico's Bolsa fell 0.4 percent and Chile's Ipsa retreated 0.6 percent.
Bond Traders Set for Apocalypse Give Lie to `Hearty' Stocks: Chart of Day
Parallel declines in the yield on three-month U.S. Treasury bills and the cost of insuring stocks against losses mean equity investors are setting themselves up for disappointment, according to PFP Wealth Management. The CHART OF THE DAY shows rates on 90-day bills issued by the U.S. government, which last week turned negative for the first time since financial markets froze, compared with the Chicago Board Options Exchange Volatility Index. The so-called VIX is trading below its level before Lehman Brothers Holdings Inc.'s bankruptcy in 2008.
While stock investors' appetite for risk has ``recovered heartily,'' bond traders ``appear to be living in fear of imminent apocalypse once again,'' Tim Price, PFP's director of investment, wrote in a report yesterday titled ``Eternal Sunshine of the Spotless Bulls.'' Shareholders are being deceived by ``conflicted happy-talkers painting their predictable landscape of perpetually sunlit uplands,'' he wrote. Bond buyers were willing to pay the government to hold their money last week amid speculation an eight-month rally in the highest-yielding securities has outpaced the prospects for growth. Three-month bill rates closed at 0.01 percent yesterday. Six-month bill rates last week fell to the lowest since 1958.
Individuals Inundate Bear-Market Funds From JPMorgan to Pimco During 2009
JPMorgan Chase & Co. and Pacific Investment Management Co.
are inundated with money from individuals attempting to mimic the performance of hedge funds speculating that the stock-market rally is over. So-called bear-market and long-short mutual funds, designed to protect against falling stock prices, attracted a record $10 billion this year through October, more than double the previous high in 2006, according to Morningstar Inc. Asset managers have opened 19 long-short funds, the most in one year. The funds' rising popularity shows how skeptical small investors remain even after the Standard & Poor's 500 Index recouped almost half the 57 percent loss incurred from October 2007 to the March 2009 low. Conventional mutual funds that only buy U.S. stocks posted $4.6 billion of redemptions in the first 10 months of the year, while bond funds added $280 billion. ``Companies are capitalizing on the uncertainty in the market,'' Nadia Papagiannis, an analyst with Chicago-based Morningstar, said in an interview. ``There's also a mystique that comes with hedge-fund investing.''
Bullish GE Options Trading Surges Following Bet on 40% Advance Before 2011
Trading of bullish General Electric Co. options surged to a five-week high as an investor wagered on a 40 percent jump in the stock before January 2011. More than 245,000 calls changed hands, or 2.7 times the four-week average. Contracts to buy GE shares for $22.50 by Jan. 21, 2011, were the most-active options in the U.S. following a single trade of 131,500 contracts. GE, the Fairfield, Connecticut-based provider of power-generation equipment, television programming and loans, added 0.6 percent to $16.12 in New York Stock Exchange composite trading. ``It's an ambitious trade because the strike price is so far above the actual stock price,'' said Frederic Ruffy, the senior options strategist at WhatsTrading.com, a New York-based provider of options market analysis. ``It reflects expectations for a good year in 2010.'' GE more than doubled after sinking to a 17-year low in March. The company has pledged to shrink GE Capital, the finance business that helped cost GE its AAA rating at Standard & Poor's in March following the credit-market freeze after Lehman Brothers Holdings Inc.'s collapse. The shares lost 0.5 percent since the end of 2008, a year in which the stock fell 56 percent because of the worst financial crisis since the 1930s.
Stocks in Asia, Europe, U.S. Futures Advance; Compass, BHP Billiton Gain
European and Asian stocks advanced and U.S. index futures rose as Japan's exports fell at the slowest pace in a year and Federal Reserve officials increased their forecast for U.S.
economic growth. Compass Group Plc, the world's largest catering company, gained 4 percent after earnings topped analysts' estimates. BHP Billiton Ltd., the largest mining company, climbed 2.3 percent in London as metals increased and Australia's central bank said the country's economy entered a ``new upswing.'' Europe's Dow Jones Stoxx 600 Index added 0.9 percent to 249.15 at 8:24 a.m. in London. The gauge has advanced 58 percent since March 9 amid signs government spending and record-low interest rates are helping to drag the economy out of recession. ``The macro setting is clearly improving,'' said Franz Wenzel, deputy director of investment strategy at Axa Investment Managers in Paris, which oversees about $600 billion. ``GDP is going to continue to expand and central banks will remain fairly accommodative. A lot of investors have been reluctant to buy equities so there is a lot of cash waiting on the sidelines,'' he said in a Bloomberg television interview.
U.K. Stocks Advance; HSBC, Anglo American, BHP Billiton Shares Lead Gains
The U.K.'s benchmark stock index, the FTSE 100, rose 0.81 percent at 8:05 a.m. The index of 102 stocks traded on the London Stock Exchange rose 43.37 to 5,367.33. Among the stocks in the index, 90 rose, 8 fell and 4 were unchanged. Gains in the FTSE 100 were led by Hsbc Holdings Plc (Hsba Ln), Anglo American Plc (Aal Ln) and Bhp Billiton Plc (Blt Ln). About
19.31 million shares traded in the FTSE 100. --Editor: Hauck.
London Stock Exchange Profit Falls on Lower Trading, Loss of Market Share
London Stock Exchange Group Plc, Europe's biggest exchange by value of listed companies, said fiscal first-half profit fell 40 percent as trading slowed and the company lost market share to new rivals. Net income for the six months ended Sept.
30 declined to 49.3 million pounds ($82 million) from 81.7 million pounds in the comparable period a year ago, the exchange said in a Regulatory News Service statement today.
That missed the 51.7 million-pound average of four analyst estimates compiled by Bloomberg. The results ``reflectedßmarket conditionsßdepressed byßthe fall-out from turmoilßin financial marketsßlast yearßand increased competition, particularly in U.K. cash equities trading which, as expected, resulted in a weaker performance in the Capital Markets division,'' Chief Executive Officer Xavier Rolet said in the statement.
Traditional exchanges including the LSE, Frankfurt-based Deutsche Boerse AG, and NYSE Euronext have been losing market share to so-called multilateral trading facilities including Turquoise, Bats Europe and Chi-X Europe Ltd., which have offered lower fees and faster trading. For the past five days, LSE accounted for 60 percent of FTSE 100 trading, according to data from Bats Europe.
Russia Micex to Jump to 1,400 This Year as Oil Rallies: Technical Analysis
Russia's Micex Index, the world's best-performing benchmark equity gauge this year, will surpass 1,400 by the end of December as oil prices rally, said Richard Ross, a technical strategist at brokerage Auerbach Grayson & Co. The Micex will gain more than 5 percent to a 14-month high by the end of 2009 as crude rises to $82 a barrel, Ross said, citing 50-day moving averages. Oil, which traded at $76.02 a barrel yesterday, may climb to $90 in the next six to nine months if the U.S.
maintains its economic recovery, he said. ``A breakout is imminent and could certainly occur by yearend,'' Ross said in a telephone interview from New York. ``Oil should catch up and provide the catalyst for that breakout above 1,400 and beyond.'' The Micex has surged 115 percent this year to 1,331.12, the best performance among 89 benchmark equity indexes tracked by Bloomberg, as oil and metals prices jumped amid a global economic recovery. Russia's dollar-denominated RTS Index is up 130 percent. Oil, the country's biggest export, has soared 74 percent this year.
Asian Stocks Advance as Australia's Central Bank Fuels Growth Speculation
Asian stocks rose, led by mining companies and automakers, after Australia's central bank said the country's economy had entered a ``new upswing'' and a Japanese export report beat economist estimates. BHP Billiton Ltd., the world's largest mining company, added 2.4 percent in Sydney on optimism metals demand will pick up. Fuji Heavy Industries Ltd., the maker of Subaru-brand cars, rose 5.3 percent in Tokyo as Japanese exports last month fell at the slowest pace in a year. James Hardie Industries NV, the top seller of home siding in the U.S., gained 2.6 percent after an index of U.S. home prices rose. ``There should be higher growth in Asia than any other region next year,'' said Christian Jin, a fund manager at HI Asset Management Co. in Seoul, which manages the equivalent of
$7.8 billion in assets. ``Domestic demand is good and exports to developed economies are likely to improve.'' The MSCI Asia Pacific Index added 0.8 percent to 117.67 as of 3:26 p.m. in Tokyo. The gauge climbed 67 percent from a more than five-year low on March 9 amid signs government stimulus measures were reviving economies around the world.
Japan's Topix Rises Most This Month on Utilities' Payouts; Developers Fall
Japanese stocks climbed, sending the Topix index to its sharpest gain this month, as falling returns on government bonds boosted the appeal of dividends paid by power companies and as indicators suggested stocks will rise. Tokyo Electric Power Co., whose dividend yield was twice as high as returns on 10-year government bonds, rose 1.3 percent. Honda Motor Co., a carmaker that gets 81 percent of its sales abroad, added 2.6 percent after a government report showed Japan's exports climbed the most month-on-month since April. Mitsui Fudosan Co., the country's largest property developer, sank 2.6 percent after Anabuki Construction Inc. filed for bankruptcy. The Topix index rose 0.5 percent to close at 833.29 in Tokyo, the steepest climb since Oct. 30. The Nikkei 225 Stock Average added 0.4 percent to 9,441.64, ending a five-day losing streak.
The Topix's 14-day relative strength index fell to 22.4 yesterday, below the 30 threshold that some traders see as a sign to buy. ``Valuations on defensive shares are coming down and investors seeking long-term returns are starting to be attracted by these stocks,'' said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $4 billion in Tokyo. ``Various indicators show the market is coming close to a technical rebound.''
China's Stocks Rebound From Biggest Loss in Three Months; Zijin Advances
China's benchmark stock index rebounded from its biggest loss in almost three months on speculation yesterday's decline was excessive relative to earnings prospects. SAIC Motor Co.
rallied 2.9 percent and Jiangxi Copper Co. added 3.8 percent.
Zijin Mining Group Co., the nation's largest gold producer, surged 6.5 percent as bullion climbed to a record for a second time this week. The Shanghai Composite Index rose 66.64, or 2.1 percent, to close at 3,290.17, after changing direction at least nine times. The measure plunged 3.5 percent yesterday, the most since Aug. 31, on concern banks will sell more shares to replenish capital. The CSI 300 Index advanced 2.3 percent to 3,629.63. ``The bull market in China is still underway,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which oversees about $89 billion in assets.
``Any pullbacks present opportunities for investors who missed out on the earlier rally to get in.''
Off-Exchange Trading Climbs to Record in Japan, Restoring Lead Over Jasdaq
Japan's alternative stock-trading systems handled a record amount of transactions in October, restoring their lead over the country's third-largest exchange. The six proprietary trading systems handled 1 percent of the value of stocks traded, the highest level on record, PTS Information Network said yesterday on its Web site. The 357 billion yen ($4
billion) managed by the platforms was 51 billion yen more than the value processed by the Jasdaq, the No. 3 exchange behind Tokyo and Osaka. The trading systems handled more than the Jasdaq in July and August, though lost that lead in September, PTS and Jasdaq data showed. Alternative systems have cut the New York Stock Exchange's share of U.S. stock trading to less than 30 percent, according to its Web site. The Tokyo bourse has said its Arrowhead trading system will start on Jan. 4, seeking to accelerate execution speed and stream more data to traders. ``We're going to fight to make sure that we continue to be the main trading destination in Japan,'' said Hironaga Miyama, an executive officer at the Tokyo Stock Exchange.
``Competition works to the benefit of both parties.''