US stocks drop on economic concern
Monday, 2 November 2009
NEW YORK, Nov 1 (Bloomberg): US stocks fell the most since May last week as new home sales that missed forecasts and a drop in consumer spending added to speculation that the seven-month rally outpaced prospects for an economic recovery.
Home Depot Inc. and Alcoa Inc. declined at least 4.4 per cent following the housing report. Bank of America Corp. lost 10 per cent, leading financial companies lower, on concern that the largest US lender will have to sell shares to pay back its government bailout. Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. retreated as a dollar rally dragged down oil and metals prices.
"The financial crisis had its roots in the property boom and bust, so any data that flies in the face of improvement is going to raise suspicion," said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, which oversees about $90 billion. "The burden of proof now falls on the economy itself to deliver."
Standard & Poor's 500 Index dropped for a second week, falling 4 per cent to 1,036.19. The Dow Jones Industrial Average slid 259.45 points, or 2.6 per cent, to 9,712.73. The Russell 2000 Index dropped 6.3 per cent to 526.77.
The S&P 500's rebound of as much as 62 per cent since March 9 propelled the index to a one-year high on Oct. 19 and pushed its valuation to more than 20 times the reported operating income of its companies, the most expensive level since 2004. All 10 industries in the S&P 500 declined last week, led by raw- materials producers, financial and industrial companies.
Home Depot, the world's largest home-improvement chain, fell 4.5 per cent to $25.09 and Alcoa, the largest US aluminum producer, slid 9.5 to $12.42 after sales of new US homes unexpectedly dropped in September. Purchases declined 3.6 per cent to a 402,000 annual pace, lower than the most pessimistic economist's forecast, according to Commerce Department figures.
D.R. Horton Inc., the largest US homebuilder by revenue, lost 12 per cent to $10.96.
Walt Disney Co., the world's biggest media company, and Wal-Mart Stores Inc., the largest retailer, fell after Americans cut spending for the first time in five months and a gauge of confidence weakened. Consumer spending dropped 0.5 per cent in September after a 1.4 per cent jump in August, Commerce Department figures showed. The Reuters/University of Michigan final index of consumer sentiment slid to 70.6 in October from 73.5 the month before.
The threat of a CIT Group Inc. bankruptcy raised concern about the sustainability of the economic rebound, pushing financial stocks to their steepest weekly drop since May. CIT, the commercial lender, plunged 37 per cent to 72 cents as investor Carl Icahn agreed to support its prepackaged bankruptcy plan. JPMorgan Chase & Co. declined 7.7 per cent to $41.77, and Morgan Stanley fell 8.2 per cent to $32.12.
Bank of America Corp. lost 10 per cent to $14.58, the steepest decline in the Dow average. Dick Bove, an analyst at Rochdale Securities LLC in Lutz, Florida, said the lender will have to sell shares to pay back its government bailout.
Home Depot Inc. and Alcoa Inc. declined at least 4.4 per cent following the housing report. Bank of America Corp. lost 10 per cent, leading financial companies lower, on concern that the largest US lender will have to sell shares to pay back its government bailout. Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. retreated as a dollar rally dragged down oil and metals prices.
"The financial crisis had its roots in the property boom and bust, so any data that flies in the face of improvement is going to raise suspicion," said Kevin Caron, a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, which oversees about $90 billion. "The burden of proof now falls on the economy itself to deliver."
Standard & Poor's 500 Index dropped for a second week, falling 4 per cent to 1,036.19. The Dow Jones Industrial Average slid 259.45 points, or 2.6 per cent, to 9,712.73. The Russell 2000 Index dropped 6.3 per cent to 526.77.
The S&P 500's rebound of as much as 62 per cent since March 9 propelled the index to a one-year high on Oct. 19 and pushed its valuation to more than 20 times the reported operating income of its companies, the most expensive level since 2004. All 10 industries in the S&P 500 declined last week, led by raw- materials producers, financial and industrial companies.
Home Depot, the world's largest home-improvement chain, fell 4.5 per cent to $25.09 and Alcoa, the largest US aluminum producer, slid 9.5 to $12.42 after sales of new US homes unexpectedly dropped in September. Purchases declined 3.6 per cent to a 402,000 annual pace, lower than the most pessimistic economist's forecast, according to Commerce Department figures.
D.R. Horton Inc., the largest US homebuilder by revenue, lost 12 per cent to $10.96.
Walt Disney Co., the world's biggest media company, and Wal-Mart Stores Inc., the largest retailer, fell after Americans cut spending for the first time in five months and a gauge of confidence weakened. Consumer spending dropped 0.5 per cent in September after a 1.4 per cent jump in August, Commerce Department figures showed. The Reuters/University of Michigan final index of consumer sentiment slid to 70.6 in October from 73.5 the month before.
The threat of a CIT Group Inc. bankruptcy raised concern about the sustainability of the economic rebound, pushing financial stocks to their steepest weekly drop since May. CIT, the commercial lender, plunged 37 per cent to 72 cents as investor Carl Icahn agreed to support its prepackaged bankruptcy plan. JPMorgan Chase & Co. declined 7.7 per cent to $41.77, and Morgan Stanley fell 8.2 per cent to $32.12.
Bank of America Corp. lost 10 per cent to $14.58, the steepest decline in the Dow average. Dick Bove, an analyst at Rochdale Securities LLC in Lutz, Florida, said the lender will have to sell shares to pay back its government bailout.