Feb. 23 (Bloomberg) -- U.S. stocks fell, dragging benchmark indexes to the biggest two-day drop in six months, as oil surged to $100 a barrel amid growing tensions in the Middle East and Hewlett-Packard Co.’s forecasts trailed analysts’ estimates.
Hewlett-Packard, the largest computer maker, tumbled 9.6 percent. Ford Motor Co. sank 2.4 percent after announcing a recall of 144,000 pickup trucks and as a Supreme Court ruling opened the auto industry to new lawsuits over seatbelt design. Lowe’s Cos. slid 1 percent after forecasting profit that missed analyst estimates. Chevron Corp. rose 1.9 percent as oil climbed to a 28-month high amid escalating violence in Libya.
The Standard & Poor’s 500 Index fell 0.6 percent to 1,307.40 as of 4 p.m. in New York and is down 2.7 percent over the last two days. The Dow Jones Industrial Average slid 107.01 points, or 0.9 percent, to 12,105.78 today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 6.4 percent to 22.13, the highest since Nov. 30.
“People are always looking forward and that’s why they are reacting negatively to the spike in oil prices,” Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “Higher crude prices may challenge the outlook for economic growth. So, even as we have better- than-estimated earnings and economic figures in the U.S., those are sort of looking at the rear-view mirror.”
Corporate Earnings
The S&P 500 has rallied 4 percent in 2011, extending last year’s 13 percent gain, as reports showed an improving economy and corporate profits beat analysts’ estimates for the eighth straight quarter, according to data compiled by Bloomberg. Per- share earnings have topped estimates at 71 percent of the 424 companies in the gauge that have reported results since Jan. 10, Bloomberg data showed.
Crude oil prices touched $100 a barrel in New York for the first time in two years as Libya’s uprising threatened to disrupt crude exports. Heavy gunfire broke out in Tripoli, army units defected and a former aide to Muammar Qaddafi said the spreading revolt may topple the regime within days.
Oil prices may surge to $220 a barrel if political unrest in North Africa halts exports from Libya and Algeria, Nomura Holdings Inc. said. The Organization of Petroleum Exporting Countries has spare production capacity of about 5 million barrels a day, according to the International Energy Agency. Saudi Arabian Oil Minister Ali al-Naimi said yesterday that the organization will boost output if there is a shortage.
Better Footing
U.S. Treasury Secretary Timothy F. Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices. U.S. consumer confidence rose to its highest level in three years this month.
“The economy is in a much stronger position to handle” rising oil prices, Geithner said today during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”
Analysts at Morgan Stanley say sharp increases in oil prices pose the biggest threat to growth because consumers suffer a sudden hit to purchasing power. They note an 85 percent to 90 percent increase in the price of oil over a year was followed by U.S. recessions in 1975, 1980, 1990, 2000 and 2008.
“The big picture in the U.S. looks good, but there are geopolitical issues,” said Richard Sichel, who oversees $1.5 billion as chief investment officer at Philadelphia Trust Co. “We had better-than-expected economic figures. However, oil prices should be a consideration on how we look at the economy especially if it begins to hurt consumers and businesses.”
Economy Dependent
Industry groups that are more dependent on economic growth led the declines in the S&P 500. Gauges of industrial makers, companies that rely on consumer-discretionary spending and technology stocks slumped at least 1.3 percent.
The Dow Jones Transportation Average tumbled 2.1 percent to 4,986.21, the lowest level since Dec. 1. United Continental Holdings Inc. sank 6.8 percent to $22.78, while FedEx Corp. declined 4.3 percent to $89.25.
Hewlett-Packard tumbled 9.6 percent to $43.59. Excluding some costs, profit will be $1.21 a share at most in the second quarter, HP said yesterday. Sales will be as much as $31.6 billion. That compares with the average analyst predictions of $1.26 in per-share profit and $32.6 billion in revenue.
Car Companies Tumble
A gauge of car companies in the S&P 500 fell 2.7 percent, the most within 24 industries. The Supreme Court ruled that Mazda Motor Corp. must defend against claims pressed by the family of a woman killed while riding in the back of a minivan. Justices said that automakers can be sued for not equipping seats with a shoulder strap and aren’t immunized by a federal regulation that allowed lap-only belts in some rear seats prior to 2007.
Ford declined 2.4 percent to $14.86. The automaker said it is recalling 144,000 F-150 pickup trucks in the U.S. and Canada because front air bags may deploy when not needed. The recall, which applies to model years 2005 and 2006, follows a request from the U.S. National Highway Traffic Safety Administration that the automaker recall the vehicles. The F-150 is the top- selling vehicle in the U.S.
Lowe’s dropped 1 percent to $25.73. The home-improvement retailer forecast first-quarter earnings excluding some items of as little as 34 cents a share. On average, the analysts in a Bloomberg survey estimated profit of 38 cents a share.
Bigger rival Home Depot Inc. slumped 2.1 percent to $37.30.
Energy Shares Rally
Energy shares had the only gain in the S&P 500 among 10 industries, rising 2 percent as a group.
Chevron, the second-largest U.S. energy company, rallied 1.9 percent, the most in the Dow average, to $102.27. Exxon Mobil Corp. gained 1.9 percent to $87.07.
Stocks maintained losses even after a report showed that sales of U.S. previously owned homes unexpectedly rose in January to the highest level in eight months. Purchases increased 2.7 percent to a 5.36 million annual rate, exceeding the 5.22 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington.
“The most encouraging thing I see about the U.S. market is that the economy is doing better than people thought,” Byron Wien, the vice chairman of Blackstone Advisory Services, told Tom Keene and Ken Prewitt on Bloomberg Radio’s “Bloomberg Surveillance.” “Earnings are coming through very favorably. I’m very bullish on the U.S. market.”
--With assistance from Nikolaj Gammeltoft in New York, Richard Miller in Washington and Grant Smith in London. Editors: Joanna Ossinger, Michael Regan
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
Hewlett-Packard, the largest computer maker, tumbled 9.6 percent. Ford Motor Co. sank 2.4 percent after announcing a recall of 144,000 pickup trucks and as a Supreme Court ruling opened the auto industry to new lawsuits over seatbelt design. Lowe’s Cos. slid 1 percent after forecasting profit that missed analyst estimates. Chevron Corp. rose 1.9 percent as oil climbed to a 28-month high amid escalating violence in Libya.
The Standard & Poor’s 500 Index fell 0.6 percent to 1,307.40 as of 4 p.m. in New York and is down 2.7 percent over the last two days. The Dow Jones Industrial Average slid 107.01 points, or 0.9 percent, to 12,105.78 today. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, jumped 6.4 percent to 22.13, the highest since Nov. 30.
“People are always looking forward and that’s why they are reacting negatively to the spike in oil prices,” Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “Higher crude prices may challenge the outlook for economic growth. So, even as we have better- than-estimated earnings and economic figures in the U.S., those are sort of looking at the rear-view mirror.”
Corporate Earnings
The S&P 500 has rallied 4 percent in 2011, extending last year’s 13 percent gain, as reports showed an improving economy and corporate profits beat analysts’ estimates for the eighth straight quarter, according to data compiled by Bloomberg. Per- share earnings have topped estimates at 71 percent of the 424 companies in the gauge that have reported results since Jan. 10, Bloomberg data showed.
Crude oil prices touched $100 a barrel in New York for the first time in two years as Libya’s uprising threatened to disrupt crude exports. Heavy gunfire broke out in Tripoli, army units defected and a former aide to Muammar Qaddafi said the spreading revolt may topple the regime within days.
Oil prices may surge to $220 a barrel if political unrest in North Africa halts exports from Libya and Algeria, Nomura Holdings Inc. said. The Organization of Petroleum Exporting Countries has spare production capacity of about 5 million barrels a day, according to the International Energy Agency. Saudi Arabian Oil Minister Ali al-Naimi said yesterday that the organization will boost output if there is a shortage.
Better Footing
U.S. Treasury Secretary Timothy F. Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices. U.S. consumer confidence rose to its highest level in three years this month.
“The economy is in a much stronger position to handle” rising oil prices, Geithner said today during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”
Analysts at Morgan Stanley say sharp increases in oil prices pose the biggest threat to growth because consumers suffer a sudden hit to purchasing power. They note an 85 percent to 90 percent increase in the price of oil over a year was followed by U.S. recessions in 1975, 1980, 1990, 2000 and 2008.
“The big picture in the U.S. looks good, but there are geopolitical issues,” said Richard Sichel, who oversees $1.5 billion as chief investment officer at Philadelphia Trust Co. “We had better-than-expected economic figures. However, oil prices should be a consideration on how we look at the economy especially if it begins to hurt consumers and businesses.”
Economy Dependent
Industry groups that are more dependent on economic growth led the declines in the S&P 500. Gauges of industrial makers, companies that rely on consumer-discretionary spending and technology stocks slumped at least 1.3 percent.
The Dow Jones Transportation Average tumbled 2.1 percent to 4,986.21, the lowest level since Dec. 1. United Continental Holdings Inc. sank 6.8 percent to $22.78, while FedEx Corp. declined 4.3 percent to $89.25.
Hewlett-Packard tumbled 9.6 percent to $43.59. Excluding some costs, profit will be $1.21 a share at most in the second quarter, HP said yesterday. Sales will be as much as $31.6 billion. That compares with the average analyst predictions of $1.26 in per-share profit and $32.6 billion in revenue.
Car Companies Tumble
A gauge of car companies in the S&P 500 fell 2.7 percent, the most within 24 industries. The Supreme Court ruled that Mazda Motor Corp. must defend against claims pressed by the family of a woman killed while riding in the back of a minivan. Justices said that automakers can be sued for not equipping seats with a shoulder strap and aren’t immunized by a federal regulation that allowed lap-only belts in some rear seats prior to 2007.
Ford declined 2.4 percent to $14.86. The automaker said it is recalling 144,000 F-150 pickup trucks in the U.S. and Canada because front air bags may deploy when not needed. The recall, which applies to model years 2005 and 2006, follows a request from the U.S. National Highway Traffic Safety Administration that the automaker recall the vehicles. The F-150 is the top- selling vehicle in the U.S.
Lowe’s dropped 1 percent to $25.73. The home-improvement retailer forecast first-quarter earnings excluding some items of as little as 34 cents a share. On average, the analysts in a Bloomberg survey estimated profit of 38 cents a share.
Bigger rival Home Depot Inc. slumped 2.1 percent to $37.30.
Energy Shares Rally
Energy shares had the only gain in the S&P 500 among 10 industries, rising 2 percent as a group.
Chevron, the second-largest U.S. energy company, rallied 1.9 percent, the most in the Dow average, to $102.27. Exxon Mobil Corp. gained 1.9 percent to $87.07.
Stocks maintained losses even after a report showed that sales of U.S. previously owned homes unexpectedly rose in January to the highest level in eight months. Purchases increased 2.7 percent to a 5.36 million annual rate, exceeding the 5.22 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington.
“The most encouraging thing I see about the U.S. market is that the economy is doing better than people thought,” Byron Wien, the vice chairman of Blackstone Advisory Services, told Tom Keene and Ken Prewitt on Bloomberg Radio’s “Bloomberg Surveillance.” “Earnings are coming through very favorably. I’m very bullish on the U.S. market.”
--With assistance from Nikolaj Gammeltoft in New York, Richard Miller in Washington and Grant Smith in London. Editors: Joanna Ossinger, Michael Regan
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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