Stocks fall on growth concern as Euro drops

Traders sit in front of computer boards at the Madrid stock exchange June 22, 2012. (REUTERS/Andrea Comas)

Global stocks slid for a seventh day, the longest streak since November, amid concern a faltering economic recovery will hurt corporate profits.

The euro slid to a two-year low, the yen and dollar surged and government bond yields from Germany to South Korea fell to records.The MSCI All-Country World Index lost 1.2 percent at 12:40 p.m. in New York and the Standard & Poor’s 500 Index slipped 0.7 percent.

Germany’s two-year note yield fell to a record minus 0.042 percent, with 10-year U.S. Treasury yields within five basis points of the lowest ever.

The yen strengthened against all 16 of its major peers, while the dollar rose versus all but the yen. Oil slipped 0.7 percent to $85.18 a barrel, paring a loss of as much as 1.9 percent.

Bank of America Corp. strategists reduced earnings estimates for S&P 500 companies for this year and next, citing Europe’s debt crisis and slowing growth in China.

Investors are bracing for what is projected to be the first decline in U.S. corporate profits in almost three years, while China’s economic growth is forecast to fall below 8 percent for the first time since 2009, according to the median estimate of economists in a survey.

“There’s a worldwide slowdown,” Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, said in a phone interview.

The firm oversees $40 billion. “Wall Street analysts have been reducing their second-quarter earnings estimates as companies have guided them lower. Profit growth, which has been a main driver for the market, will be less supportive going forward.”

The S&P 500 has retreated more than 3 percent over the last six days. Stocks fell Thursday even after applications for U.S. jobless benefits last week decreased by 26,000 to 350,000, the fewest since March 2008, Labor Department figures showed.

Economists forecast 372,000 claims, according to the median estimate in a Bloomberg News survey. The decrease reflected the volatility of claims during the annual autoplant retooling period.

Prices of goods imported into the United States decreased more than forecast in June as declining energy costs curbed inflation.

The 2.7 percent plunge in the import-price index was the biggest since December 2008 and followed a 1.2 percent drop in May, Labor Department figures showed. Prices excluding fuel fell 0.3 percent, the most in almost two years.

Eight of the 10 main industry groups in the S&P 500 retreated Thursday, led by losses of more than 1.2 percent in commodity producers and technology companies. Hewlett-Packard Co., Intel Corp. and 3M Co. lost more than 1.8 percent as 23 of 30 stocks in the Dow Jones Industrial Average retreated.

Supervalu Inc. sank 45 percent after the third-largest U.S. grocery chain said it will review strategic alternatives for the business and suspended its dividend.

Marriott International Inc., the biggest publicly traded U.S. hotel chain, dropped 5.9 percent after cutting its forecast for growth outside North America.

JPMorgan Chase & Co. slipped 0.6 percent. Investors will look for Chief Executive Officer Jamie Dimon to restore confidence when the company releases second-quarter results tomorrow, the first major U.S. bank to report.

The bank may say profit fell 40 percent to 76 cents a share, excluding accounting adjustments, according to the average estimate from analysts in a Bloomberg survey.

Bearish options on JPMorgan are the cheapest in two years on speculation the shares already reflect the bank’s multibillion-dollar trading loss. Puts protecting against a 10 percent drop in the New York-based lender cost 1.15 times more than calls betting on a 10 percent gain, according to data on 30-day options, lowest so-called skew since January 2010.

Bank of America strategists reduced earnings forecasts for S&P 500 companies by 1.4 percent for this year and next year. Strategists Dan Suzuki, Savita Subramanian and Jill Carey now project earnings of $102 per share for 2012 and $109 for 2013, according to a note to clients Thursday.

A version of this article appeared in the print edition of The Daily Star on July 13, 2012, on page 6.




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