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S&P 500 falls for seventh day in eight
1 of 2. Traders work on the floor of the New York Stock Exchange in New York July 13, 2012.
Credit: Reuters/Shannon Stapleton
NEW YORK |
NEW YORK (Reuters) - A surprise decline in June retail sales was the latest worrying sign from the economy, pushing stocks slightly lower on Monday, but Citigroup's earnings limited losses.
The S&P 500 has fallen in seven of the past eight sessions, pressured by concerns about economic growth. Still, in a sign of resilience, the index is up roughly 7 percent from a low hit early in June despite the worsening economic data.
Trading volume at 5.06 billion shares on the NYSE, Amex and Nasdaq was the second lightest day this year, according to preliminary data from Reuters.
The drop in retail sales in June, the third consecutive monthly decline, contrasted with economists' expectations for a small increase and was the latest sign the recovery is flagging.
Citigroup's earnings, which exceeded estimates, followed JPMorgan Chase's (JPM.N) forecast-beating earnings on Friday, which sparked a rally and broke a six-day streak of losses by the Dow industrials.
Shares of Citigroup (C.N) gained around 0.6 percent to $26.81. Although the third largest U.S. bank by assets reported stronger-than-expected earnings, its profit fell 12 percent due to losses from credit crisis-era assets.
Giri Cherukuri, head trader at OakBrook Investments, which oversees $1.3 billion in Lisle, Illinois, said there was a tug-of-war between better-than-expected earnings in the financial sector and worries about the economy.
"The next week or so the market will be driven more by earnings than economic numbers," he said, noting that recent cautious outlooks from U.S. corporations could translate into disappointing earnings as reporting season unfolds.
Many companies have warned on profits in recent weeks. Negative to positive earnings guidance for the second quarter is 3.3 to 1, the worst since 2008, Thomson Reuters data showed.
The Dow Jones industrial average .DJI dropped 49.88 points, or 0.39 percent, to 12,727.21. The Standard & Poor's 500 Index .SPX fell 3.14 points, or 0.23 percent, to 1,353.64. The Nasdaq Composite Index .IXIC lost 11.53 points, or 0.40 percent, to 2,896.94.
"Three months in a row of lower retail sales is pretty concerning. People are going to have to lower their GDP estimates," said Paul Zemsky, head of asset allocation at ING Investment Management in New York. "Given that, I'm surprised the market is holding so well."
Zemsky said expectations that earnings turn out better than feared could be one reason. Record low U.S. Treasury bond yields and expectations that the Federal Reserve could support the economy have also helped prop up stocks.
The IMF shaved its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent.
The World Trade Organization ruled in favor of the United States, finding that China discriminates against foreign bank cards. The decision could help U.S. credit card companies like Visa, Mastercard and American Express (AXP.N).
In another credit card development, Visa Inc (V.N) and MasterCard Inc (MA.N) and banks reached a $7.25 billion settlement with U.S. retailers in a lawsuit late on Friday.
Visa rose 2.5 percent to $127.15 and MasterCard shares gained 1.7 percent to $436.89. American Express shares rose 1.2 percent to $58.64.
In mergers and acquisitions news, GlaxoSmithKline (GSK.L) is to acquire its long-time partner Human Genome Sciences Inc HGSI.O for $3 billion, ending a three-month hostile pursuit of the U.S. biotech company on friendly terms after sweetening its offer. [ID:nL6E8IGCB9] Shares of Human Genome HGSI.O rose 4.5 percent to $14.19.
In another healthcare deal, private equity firm TPG said it would buy U.S.-based Par Pharmaceutical PRX.N for $1.9 billion, sending Par shares up 36.7 percent to $50.
(Reporting by Edward Krudy, editing by Kenneth Barry)
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In addition, the big banks sit on $2 trillion in toxic assets left over from the financial crisis, and they invested $500 billion in EU bank bonds and advised major depositors to invest $1 trillion before the EU’s problems became infamous. In fairness to the EU banks, US financial instutions sold the EU banks and governments the toxic assets that now plague the EU, so the US deserves the $1.5 trillion in relatively new toxic assets that the US banks and their customers (Score another point for the repeal of Glass-Steagall.) bought from the EU. In addition, the business section of my local paper has an article that points out $1.7 trillion in cash that non-bank firms hold to survive the current economic uncertainty. They refuse to invest it in internal growth or in acquisitions. This may appear prudent, but these problems combine into $5.2 trillion out of the $16 trillion US economy or 32.5% of the US economy that is not being used for any productive purpose. I have repeatedly warned that the US is sliding into another recession because it is not using its resources to grow its way out of its economic problems, but this new reduction in US resources makes it a possibility that the US economy is going into a worse depression instead of just another recession.
I have advised people to invest in Australia, Brazil, Canada, China, and Russia because they have continental resources, and their prices are low at this time owing to the economic difficulties in the West. These countries are growing themselves out the economic hardships of the current crisis. I recommend the state-owned enterprises in China and Russia because the governments do not cheat themselves. Siberia may become the world’s largest producer of oil and gas, and it sits next door to the world’s biggest car market. One oil and one gas pipeline are already in operation into China, and two oil and one gas pipeline are under construction. The other three countries are good resource plays, and global warming is making Russia and Canada more able to grow food for countries that are losing this ability. China has a massive irrigation project that started in 2001 and should last until 2020 or 2025. China has had bumper harvests in 2011 and 2012, and China sold food to the US in 2011 after floods, fires, and droughts reduced US production, and the US may need to buy food from China in 2012. Prepare for the US to decline and for others to grow.
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