In the U.S.: U.S. Stocks Fall on Concern Over Europe as FedEx Slump

18 September 2012


Is 1500 still likely with all this uncertainty?

U.S. stocks fell, after the Standard & Poor’s 500 Index rose to the highest level since 2007 last week, as FedEx Corp. (FDX) slumped and concern grew that Europe’s leaders will struggle to resolve their debt crisis.

FedEx dropped 2.2 percent as it reduced its profit outlook after quarterly earnings fell. Bank of America Corp. (BAC), the second-biggest U.S. lender by assets, slid 1.6 percent.Advanced Micro Devices Inc. (AMD) dropped 5.7 percent after announcing its chief financial officer will resign.

The S&P 500 retreated 0.2 percent to 1,458.55 at 10:05 a.m. inNew York. The equity benchmark rose to its highest level since December 2007 on Sept. 14 after the Federal Reserve said it will buy mortgage securities to support economic growth. TheDow Jones Industrial Average lost 1.17 points, or less than 0.1 percent, to 13,551.93 today.

“We’re looking for the market to flatten out and hold where it is until the U.S. election,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $13 billion, said in a telephone interview. “Europe is an overhang that’s still there on the U.S. market. Their debt crisis is not being handled, it’s Band-Aids here and there. It’s slowing us down.”

Stock Valuations

The S&P 500 is trading at 14.1 times the estimated earnings of its constituent members, close to its highest price multiple since the end of 2010, data compiled by Bloomberg show. Bearish options contracts on the S&P 500 have dropped to the cheapest level in more than three years following the Fed’s announcement of a third round of quantitative easing.

The S&P 500 (SPX) fell 0.3 percent yesterday after a meeting of European Union finance ministers in Cyprus on Sept. 14 and 15 failed to agree on a timetable for a more unified banking industry, the terms of bailout requests and the role played by the European Central Bank.

ECB Governing Council member Luc Coene said Spain may have to ask the European Commission for aid and submit to conditions imposed by its creditors if bond yields continue to increase. Coene spoke at a panel discussion in London yesterday.

The Spanish government sold 4.6 billion euros of bills at an auction today, more than its maximum target. Spain’s bond yields climbed to more than 6 percent yesterday for the first time since Sept. 7, the day after policy makers approved ECB President Mario Draghi’s plan to buy government debt to ensure the transmission of interest rates.

FedEx’s Outlook

FedEx slumped 2.2 percent to $87.35. The world’s biggest cargo airline reduced its profit outlook for the year through May after quarterly earnings dropped for the first time in almost three years amid reduced demand for premium shipping services. Earnings will be $6.20 to $6.60 a share compared with a previous forecast of $6.90 to $7.40, excluding potential benefits from cost cuts that the Memphis, Tennessee-based company is reviewing.

Bank of America slipped 1.6 percent to $9.15 for the biggest retreat in the Dow. The lender, which climbed 20 percent over the two weeks through Sept. 14, declined 2.6 percent yesterday.

AMD declined 5.7 percent to $3.78, the most in the S&P 500, after the second-biggest maker of processors said CFO Thomas Seifert will leave to seek other opportunities. The resignation is the latest disruption at the semiconductor maker, which is struggling to prevent larger rival Intel Corp. from taking market share and is facing slowing demand in the PC market. His departure adds to growing concern about management’s ability to turn the company around, said Patrick Wang, an analyst at Evercore Partners Inc.

Oxigene Inc. (OXGN) jumped 33 percent to 73 cents after the pharmaceuticals company reached an agreement with the Food and Drug Administration for a Phase 3 trial of a thyroid cancer drug.

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