Stocks post fifth weekly loss
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- July 4, 2008
Most US stocks fell, completing the longest streak of weekly declines in four years, after a reduced sales forecast by Nvidia outweighed speculation the Federal Reserve will hold off raising interest rates.
The Standard & Poor's 500 Index gained 0.1% to 1262.9 after earlier dipping below 1252.12, a 20% decline from its October 9 record. Nvidia, the second-biggest maker of computer-graphics chips, plunged the most since 2004. Freddie Mac tumbled, helping drag the S&P 500 Banks Index to a 12-year low, after saying it is ``unlikely'' to raise capital this month. General Electric and General Motors advanced after a drop in jobs spurred traders to bet the Fed will keep the overnight lending rate between banks at 2%.
More than five stocks retreated for every three that rose on the New York Stock Exchange. The S&P 500 climbed 1.38 points, paring its weekly drop to 1.2%, the fifth straight retreat. The Dow Jones Industrial Average, which closed in a bear market yesterday, added 73.03, or 0.7%, to 11,288.54. The Nasdaq Composite Index lost 6.08, or 0.3%, to 2245.38 as Nvidia plunged 31%.
''Staying in this economic malaise for an extended period of time seems likely,'' said Michael Strauss, the chief economist and market strategist at Commonfund, which oversees about $US43 billion. ''Input cost pressures and the squeeze of profit margins because of the lack of consumer demand may make earnings more challenging and I think the equity market has been reflecting that.''
Bear Market Brink
The S&P 500 earlier fell below the 1252.12 threshold that marks a 20% bear market retreat. The slide was limited by a third straight rally in Lehman Brothers securities firm. Record oil prices and signs the US economy is slowing pushed steelmakers and coal producers in S&P indexes down more than 10% this week, leaving the S&P 500 with a 14% decline in 2008.
US exchanges closed at 1pm New York time ahead of the Independence Day holiday tomorrow.
Nvidia sank $US5.54 to $US12.49, the lowest since July 2006. Sales this quarter will fall to between $US875 million and $US975 million, the company said. The second-biggest US maker of graphics processors predicted in May that revenue would decline 5% from the previous period's $US1.15 billion, indicating about $US1.1 billion. Nvidia will also record costs of as much as $US200 million because of a defect in some laptop chips.
Chip Stocks
An index of companies in the S&P 500 that produce semiconductors and related equipment slid 2.1%, the steepest drop among 24 industries. Intel, the world's largest chipmaker, lost 27 cents to $US20.66.
Freddie Mac declined $US1.42 to $US14.50, the lowest since March 1995. The second-largest US mortgage-finance company said it's ''unlikely'' to raise capital until after reporting second-quarter earnings next month. Executives told investors in May the company would secure $US5.5 billion in additional reserves by ''mid-year'' to combat loan delinquencies.
AT&T dropped 31 cents to $US32.58 after Credit Suisse reduced profit estimates for the largest US phone company, saying a slowing economy and increased competition will reduce earnings.
The S&P 500 Managed Health Care Index tumbled 6% to the lowest level since November 2004 after analysts downgraded UnitedHealth Group, Aetna and Health Net.
UBS owered UnitedHealth's rating to ''neutral'' from ''buy.'' Aetna and Health Net were downgraded to ''sell'' from ''neutral'' at Goldman Sachs. Both analysts cited declines in commercial membership, growth in medical expenses and stronger price competition.
UnitedHealth, Aetna
UnitedHealth, the largest US health insurer, tumbled $US2.16 to $US22.96. Aetna fell $US2.65 to $US37.14. Health Net lost $US3.09 to $US22.55.
Futures trading showed 85% odds that policy makers will keep the central bank's benchmark interest rate at 2% next month, up from a 75% chance yesterday. The Labor Department said payrolls fell by 62,000 in June, the sixth straight month of declines. Economists surveyed by Bloomberg had forecast a decrease of 60,000 jobs. The jobless rate remained at 5.5%.
US service industries unexpectedly contracted in June as a gauge of prices soared to a record and employment reached an all- time low. The Institute for Supply Management's index of non- manufacturing businesses, which make up almost 90% of the economy, decreased to 48.2, the lowest level since January, from 51.7 in May.
GE, GM Rise
GE, the world's fifth-largest company by market value, added 40 cents to $US26.91. Sterne, Agee & Leach analysts wrote in a research note that it's ''highly unlikely'' GE will lose its top credit rating and predicted the company will report second- quarter earnings that meet analysts' estimates.
GM, which fell to the lowest level since 1954 yesterday, climbed 14 cents to $US10.12.
Procter & Gamble, the consumer-products maker that gets about 23% of its sales from Europe, gained 98 cents to $US63.67. European Central Bank President Jean-Claude Trichet played down prospects of further interest-rate increases, saying the quarter-point hike today will help bring inflation back below 2%.
Europe's Dow Jones Stoxx 600 Index climbed 0.9%.
Penn National Gaming gained $US1.06 to $US29.66. The company's $US6.1 billion takeover by private-equity investors Fortress Investment Group and Centerbridge Partners was scrapped. Penn will receive $US225 million to terminate the takeover and $US1.25 billion in preferred equity. Shares of the company fell 16% over the previous five sessions.
Zions Bancorporation fell the most in eight years after the sale of its preferred shares fell short. Zions sold $US45.7 million in perpetual preferred stock after offering $US150 million of the shares, the lender said in a regulatory filing. The stock lost $US4.57, or 14%, to $US27.05. The S&P 500 Banks Index lost 1.7%.
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