U.S. Stocks, Commodities Decline as Job Losses Top Estimate Share | Email | Print | A A A
By Lynn Thomasson
July 2 (Bloomberg) -- U.S. stocks slid, sending the Standard & Poor’s 500 Index to a third straight weekly drop, as a worse-than-projected decrease in jobs added to concern that rising unemployment will prolong the recession. Treasuries rose, while oil and metal prices retreated
Alcoa Inc., Boeing Co. and Walt Disney Co. slid more than 2.4 percent after the Labor Department said payrolls shrank by 467,000 jobs last month, topping the average estimate in a Bloomberg survey of economists by more than 100,000. Lear Corp., the second-biggest maker of automotive seats, sank on plans to file for Chapter 11 bankruptcy.
“I would argue that we’ll have a correction between 5 and 15 percent,” said Hugh Johnson, who manages more than $1.5 billion as chairman of Albany, New York-based Johnson Illington. “I think this number could be the catalyst that starts the corrective process. It’s clearly disappointing.”
The S&P 500 tumbled 1.7 percent to 907.92 at 9:34 a.m. in New York. The Dow Jones Industrial Average retreated 137.24 points, or 1.6 percent, to 8,366.82. Twenty-five stocks fell for each that rose on the New York Stock Exchange. European and Asian shares declined.
The S&P 500 has slumped 3.7 percent since June 12 on concern the 40 percent, three-month surge in the index outpaced prospects for a recovery in the economy and corporate profits. The U.S. equity benchmark is poised to erase yesterday’s advance and decline for a third straight week, the longest stretch of losses since March. U.S. markets will be closed tomorrow for the Independence Day holiday.
The second-quarter earnings season will kick off next week with Alcoa Inc., the largest U.S. aluminum producer, reporting results on July 8. Analysts estimate profits in the S&P 500 declined 34 percent in the second quarter and will slump 22 percent on average in the third, before rebounding 62 percent in the final three-month period, according to Bloomberg data.
Best Quarter Since 1998
Benchmark indexes advanced yesterday, adding to gains from the S&P 500’s best quarter since 1998, as improving gauges of manufacturing and home sales added to optimism the worst of the recession is over.
The steepest quarterly rally in value stocks is a bearish sign to some of the largest money managers, who say it shows the equity market has relied on companies with the worst finances to fuel its rebound.
Money-losing companies in the MSCI World Value Index with the most debt climbed an average of 38 percent last quarter, compared with a 20 percent gain for the MSCI World Index, according to data compiled by Bloomberg. That pushed value stocks, or those trading at the lowest level relative to their earnings or assets, in the index up 22 percent, the biggest increase since at least 1995.
Gains will be harder to come by as investors search for profit growth to justify the 41 percent rally in the MSCI World since March 9, according to James Dunigan of PNC Financial Services Group Inc.
To contact the reporter on this story: Lynn Thomasson in New York at [email protected] Last Updated: July 2, 2009 09:37 EDT
