U.S. stocks slid for a sixth day Thursday as concern spread that weaker global economic growth and the European debt crisis will hurt U.S. corporate earnings. The Dow Jones industrial average and Standard & Poor's 500 index had their longest losing streaks since mid-May.
Billionaire investment guru Warren Buffett set a gloomy tone before the market opened, telling CNBC that weak demand is hurting his retail, jewelry, carpet and other businesses. He said business in Europe has dropped off quickly in the past two months.
Other companies appear to be struggling as well. Aluminum maker Alcoa, which kicked off the second-quarter earnings season on Monday, reported very weak revenue because of the faltering global economy. Fastenal, a U.S. industrial distributor, reported revenue Thursday that was weaker than analysts were expecting.
Hotel operator Marriott and Progressive, an insurance company, both plunged after reporting weak financial results.
Traders also sweated about Europe's debt crisis and new Chinese economic data due out Friday.
The Dow fell as much as 112 points in early trading. It recovered to turn briefly positive in the afternoon before closing with a loss of 31.26 points, or 0.3 percent, at 12,573.27. Dow component 3M fell $1.44, or 2 percent, to $86.41. Demand for the manufacturing conglomerate's products would weaken if the global economy faltered.
The S&P 500 fell 6.69 points, or 0.5 percent, at 1,334.76. The Nasdaq composite index fell 21.79, or 0.8 percent, to 2,866.19.
Supermarket operator Supervalu plunged by nearly half after the company reported a sharp drop in net income late Tuesday and suspended its dividend. Supervalu, which owns Albertsons, Jewel-Osco and Save-A-Lot, lost $2.60 to close at $2.69.
Supervalu's losses dragged on rival grocery chain Safeway, which fell $2.25, or 13 percent, to $15.73. Safeway's was the biggest percentage decline in the S&P 500 index.
The weak corporate results will likely prompt analysts to lower their quarterly earnings forecasts for the entire S&P 500, said John Fox, co-manager of the FAM Value Fund, which specializes in small and medium-sized companies.
"There will be more disappointments than surprises," Fox said. "It's a global world, and many of the small companies we invest in do business all over the world," he said, adding that his firm already is using estimates that are below Wall Street's consensus.
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Fox said Buffett sounded far more negative than he has over the past year. At Berkshire's last annual meeting, which Fox attended, Buffett declared that all but a handful of the conglomerate's companies were doing better.
"The tone of his comments has definitely changed, which I think is a fair reflection of the environment," Fox said.
In Europe, Spain's borrowing costs crept higher, a sign that investors fear the country might default. Spain's neighbors are rescuing the country's banks, but the government itself was not bailed out and bond investors are not satisfied. Spain's main stock index closed down 2.6 percent.
Greece continues to struggle. Its government said unemployment there continues to rise and hit 22.5 percent in April.
The euro fell to a two-year low as fed-up investors questioned the region's ability to solve its debt crisis conclusively. It fell as low as $1.2165 and is down about five cents already this month.
A stronger dollar is another threat to U.S. corporate earnings, Fox said, because it makes U.S. goods more expensive to overseas buyers. Later, when companies convert those sales back into dollars, the unfavorable exchange rate shrinks the value of revenue earned overseas.
Traders also are concerned that China's economy is growing more slowly and might deprive the world of a crucial economic engine. New numbers due out on Friday are expected to show that growth in the second quarter fell to 7.3 percent from the previous quarter's 8.1 percent, which is already a three-year low. Revenue from the construction, shipbuilding and export manufacturing industries might have been cut in half since last year.
Among the companies making big moves:
— Marriott International dropped 6 percent. The hotel operator reported revenue late Wednesday that fell short of analysts' expectations. The company also cut its prediction for fees it would make from in-room services like wireless Internet. The stock fell $2.45 to $35.58.
— Progressive, an auto insurance company, fell 5 percent after reporting a 52 percent drop in second-quarter income, partly due to an investment loss. The results were far weaker than analysts had expected. Progressive fell $1.02 to $19.53.
___
Daniel Wagner can be reached at www.twitter.com/wagnerreports/
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Tech stocks lead Wall Street losses - Financial Times
Last updated: July 12, 2012 9:50 pm
Small Business migrants: Edwina Paddis - New Zealand Herald
Edwina Paddis, Australian founder of Inspired Food, a boutique food business known for its Rocky Road, biscuits and sauces and chutneys.
After working in corporate jobs including the Board of the Australian Trade Commission, having a family, Edwina and her sister set up their own catering business in Sydney. Then Edwina moved with her husband and family to NZ in 2010.
After we moved to NZ for my husband's work in late 2010, I was surprised and excited by a dynamic and vibrant food scene here, with places like the La Cigalle market and food merchants like Farro Fresh.
Through my local neighbourhood connections I was introduced to the owner of Le Monde at Parnell and started working there on a casual basis. I suggested that we offer our customers a sweet treat over Easter, so I cooked up a few batches of my Rocky Road to serve on the counter. Customers loved the product and asked where they could buy the product.
With my passion for food, the buzz of NZ's artisan food scene and my husband's background working for some of Australiasia's most successful FMCG companies, we created Inspired Food.
To date, the entire process has been supported by our local community. Every time I have spoken to someone about my business here, I have found that people are so helpful with advice and leads.
I remember standing on a netball court discussing how I was looking for a kitchen to start my business but just wanted to use a restaurant kitchen during the day to start. Someone overheard our conversation and mentioned that they owned a restaurant and it would be available. I used that kitchen for six months until I recently moved into a commercial kitchen which I now lease.
Again from the kindness of another food producer who was relocating to bigger premises, I was guided to our new premises. I have found instances like this totally overwhelming and personally rewarding to have met such sincere people.
The differences between operating a business in NZ versus Australia.
There is no doubt that establishing a small business in NZ is far easier and simpler than our experience was in Australia, but this extends beyond the simple statutory requirements.
It is the support that we have had from our local community, both personal and business and friends we have made here rallying around us as we looked to embark on this unexpected journey. Our time in NZ was intended to be limited given my husband's work, but the opportunities that have been presented to us and the ability to create and establish our business and a NZ food brand, has motivated us to consider the longer term commitments to NZ with the ability to extend back to Australia in the longer term.
Australia is regarded as egalitarian with the "fair go". Our experience in NZ has shown us "if you're prepared to give it a go, we'll give you an opportunity approach", a subtle difference but one that seems to permeate the NZ business psychology. We love both countries and our experiences from Australia have given us the opportunity to apply our passion, knowledge and skills to the NZ market.
We hope that from these small beginnings we can create a brand that we and other New Zealanders will be proud of and will take what we love about NZ to other markets.
What's really surprised me in terms of running our business in NZ is the support and infrastructure available to small businesses, whether it's our suppliers, packaging, internet, freight companies or retailers. There are always challenges, but you work through it, you're able to focus on what the important elements of your business are, growth and innovation. I expect as we expand and grow therefore the challenges will also expand and grow.
Attitudes toward an Australian running a business here.
Obviously there are limitations, in NZ the size of the market longer term, but in Australia the size of the market can hinder you from starting up in the first place.
I would hope that being Australian is not a disadvantage, and I guess one thing that has surprised me is the love/hate relationship that New Zealander's have toward Australia. When we first moved here all the locals we met were somewhat puzzled that we had made such a move and asked why; our immediate response was why not, it's a beautiful country, wonderful people and a great quality of life. Australia offers great opportunities and a good life, but it's a big complex society, especially Sydney.
I guess that's one thing I really enjoy about Auckland, that it is reminiscent of the Sydney I grew up in, but offers the sophistication and diversity you get in any big city.
In terms of the business community and being Australian, this hasn't impacted negatively at all, in fact I think most people I have dealt with have been curious about our backgrounds and how we have come about to be doing what we are doing.
NZ Government's support for start-up businesses compared with Australia.
When the time comes and we're looking to grow our business into the export markets, we'll definitely be looking to see what incentives are available to expand Inspired Food internationally. Having worked for the Australian Trade Commission, I know the depth and diversity of export programmes and grants available from the Aussie end, so I expect that NZ will offer similar incentives.
The NZ entrepreneurial lifestyle
NZ has given me the ability to start up a business in an environment which has been very pro artisan producers and embraces all that the little players have to offer. People like to try something different, something unique, and something that has a story and passion behind it, which is everything Inspired is.
Even today seeing my product in the Taste magazine gives me a sense of pride and satisfaction. Farro on Facebook asked their consumers to name their favourite Top 20 local brands and having our little Inspired brand come in at 18th was surprising and yet so rewarding. It proves that you don't need to be a big multinational to have an impact.
By Gill South | Email GillCANADA STOCKS-TSX hits 2-week low on China worries - Reuters UK
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Stocks Fall on Growth Concern as Euro Drops; Bonds Rally - Bloomberg
Global stocks slid for a seventh day, the longest slump since November, amid concern a faltering economic recovery will hurt corporate profits. The euro fell to a two-year low, the yen and dollar gained and government bond yields from Germany to South Korea fell to records.
The MSCI All-Country World Index lost 1 percent at 4 p.m. in New York and the Standard & Poor’s 500 Index slipped 0.5 percent, while rallies in Procter & Gamble Co. and Merck & Co. limited the Dow Jones Industrial Average’s drop. German two-year note yields fell to minus 0.042 percent and 10-year U.S. yields were within four basis points of the lowest ever. The yen rose against all 16 major peers and the dollar gained versus 13. Corn and wheat led commodities up as a drought threatens U.S. crops. Oil erased losses as the U.S. added sanctions against Iran.
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 economic growth in China. Investors are bracing for what’s projected to be the first drop in U.S. corporate profits in almost three years, while China’s 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.”
Losses Pared
The S&P 500 pared losses today after dropping as much as 1.2 percent to 1,325.41, dipping below its average price from the past 50 days for a third straight day. The index closed at 1,334.76, compared with its 50-day moving average of 1,334.546, according to Bloomberg data.
“Short term, the market got oversold,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in a phone interview. “There is at least a willingness of buyers to step in today given the weakness that we’ve seen over the last several days. You have some potential market-moving news tomorrow, with earnings from JPMorgan and Wells Fargo.”
The S&P 500 has retreated almost 3 percent over the last six days. Stocks fell today 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 auto-plant retooling period.
Import Prices
Prices of goods imported into the U.S. 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.
Among the 10 main industry groups in the S&P 500, technology and financial companies lost more than 1 percent for the biggest declines. Intel Corp., Cisco Systems Inc. and Microsoft Corp. dropped more than 2.2 percent to lead losses in 22 of 30 stocks in the Dow.
Supervalu Sinks
Supervalu Inc. (SVU) sank 49 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 6.4 percent after cutting its forecast for growth outside North America.
Procter & Gamble and Merck rallied 3.8 percent and 4.1 percent respectively, helping the Dow recover from a drop of as much as 112 points to close down 31.26 points at 12,573.27. P&G climbed the most since 2009 after the Federal Trade Commission cleared William Ackman’s hedge fund company to take a stake in the maker of household products. Merck rallied to a four-year high after reporting an osteoporosis drug worked well in a trial.
JPMorgan Chase & Co. slipped 1.6 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. JPMorgan shares have dropped 16 percent since May 10, when the company disclosed a loss on credit derivatives of at least $2 billion.
JPMorgan Puts
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 today.
`Drift Lower'
“Although the bottom-up consensus forecasts have continued to drift lower since last summer, they still appear too optimistic in light of the ongoing European crisis, the looming fiscal cliff and the slowdown in China,” the strategists wrote. “The recent weakness in earnings revision and guidance trends may be a sign that consensus expectations are in the early stages of being reset lower.”
Analysts surveyed by Bloomberg project that earnings at S&P 500 companies decreased 1.8 percent in the second quarter, the first drop since 2009, and will increase 7.2 percent for all of 2012. At this time last year, they predicted profit growth of 13 percent for 2012. Congress has yet to resolve the so-called fiscal cliff, which represents more than $600 billion in higher taxes and reductions in defense and other government programs in 2013 that will take place without action.
The yield on 10-year U.S. Treasury notes fell four basis points, or 0.04 percentage point, to 1.4760 percent, approaching the June 1 all-time low of 1.4387 percent.
The government’s sale of $13 billion in 30-year bonds today was the second consecutive U.S. auction to attract a record low yield. The long bonds were sold at a yield of 2.580 percent, down from the previous record of 2.72 percent at a June 14 sale. Yesterday’s 10-year note auction drew a yield of 1.459 percent.
Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., told CNBC that economic growth in the U.S. is slowing even as the housing market shows signs of rebounding.
‘Tempered Down’
“The general economy in the United States has been more or less flat, and so the growth has tempered down,” he said today in an interview with the television station from Sun Valley, Idaho.
Buffett’s remarks contrast with his comment a year ago to Bloomberg Television’s Betty Liu in Sun Valley that the economy and jobs will “come back big time” when residential construction recovers. U.S. unemployment has exceeded 8 percent for more than three years. Economists on average predict the U.S. economy will expand 2.1 percent in 2012, down from a projection of 3.3 percent in February 2011.
Builders Rally
Shares of builders advanced, with Standard Pacific Corp., Lennar Corp. and KB Home climbing at least 3.6 percent to pace an advance in 10 of 11 stocks in the S&P Supercomposite Homebuilding Index.
The Federal Reserve yesterday signaled that a further economic slowdown would bring growing support among policy makers for additional steps to spur the three-year expansion. A few members of the Federal Open Market Committee said the Fed should ease policy to move the economy toward its targets for full employment and stable prices, according to minutes of the June 19-20 meeting released yesterday. Several others said more action could be warranted if growth slows, risks intensified or inflation seemed likely to fall “persistently” below their goal.
The Stoxx Europe 600 Index fell 1.1 percent for its biggest drop of the month. Temenos Group AG plunged 28 percent to a three-year low after the Swiss maker of banking software cut its revenue-growth forecast and said Chief Executive Officer Guy Dubois will leave. Aegis Group Plc surged 45 percent as the U.K. advertising company agreed to be bought by Japan’s Dentsu Inc. in a 3.16 billion-pound ($4.9 billion) deal.
The MSCI Emerging Markets Index (MXEF) sank 1.9 percent, its biggest decline since May 23 The Kospi Index fell 2.2 percent and the won weakened 1.1 percent versus the dollar after the Bank of Korea unexpectedly cut borrowing costs. Chinese stocks listed in Hong Kong slid 2.2 percent and benchmark indexes fell more than 1 percent in India, Hungary, the Czech Republic, Taiwan and Thailand.
European Yields
The yield on Australia’s one-year note touched a record low and rates South Korea’s debt due March 2017 slid to the lowest level since Bloomberg started compiling Korean bond yields in 2000. Austrian and French five-year yields also slid to records. Spanish 10-year yields increased six basis points to 6.64 percent after plunging 48 points in the previous two days after European governments moved to quicken emergency loans to the country’s banks.
The European Central Bank said overnight deposits of financial institutions dropped to 324.9 billion euros, the lowest level in almost seven months after policy makers said last week they would no longer pay interest for the funds.
’Risk Off’
The euro fell 0.3 percent to $1.2199 and reached $1.2167, the lowest since June 30, 2010. It weakened 0.9 percent against the yen. The dollar lost 0.6 percent versus the yen, while strengthening against 13 of 16 major peers.
“With the currency market in full risk off mode this morning, lets be clear that this is a move driven by deleveraging and not relative balance sheet expansion,” Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management in New York, wrote in a note to clients. “With no major economic data or news catalyst, investors had been gradually swapping euros and other risky currencies for the U.S. dollar and Japanese yen throughout the European trading session.”
Commodities
Oil in New York rose 0.3 percent to $86.08 a barrel, recovering from a drop of as much as 1.9 percent. The U.S. said it will target Iran’s weapons proliferation networks and “front companies” helping to evade international sanctions.
Natural gas rose 0.7 percent as forecasts for hotter-than- normal weather in the U.S. Northeast signaled stronger demand from power plants. The fuel reversed a drop of as much as 4.7 percent triggered when U.S. government data showed stockpiles expanded by 33 billion cubic feet to 3.135 trillion. Analyst estimates compiled by Bloomberg showed an expected increase of 27 billion cubic feet.
The S&P GSCI gauge of 24 commodities added 0.4 percent as 12 of its 24 commodities advanced.
Corn climbed 4 percent to $7.3225 a bushel after Goldman Sachs Group Inc. and Citigroup Inc. raised their price forecasts because of tighter supplies because of crop damage amid the worst U.S. drought since 1988. Wheat rallied 2.5 percent and soybeans climbed 0.4 percent.
Most of the U.S. Midwest will get less than 20 percent of normal rain in the next five days, and temperatures will rise above 100 degrees Fahrenheit (35 degrees Celsius) in the four days ending July 18, according to T-storm Weather LLC. As much as 51 percent
Cocoa futures plunged 4.5 percent to lead losses in commodities after European bean usage declined 18 percent to a three-year low in the second quarter.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
Stocks Fall With Euro on Growth Concern
Jin Lee/Bloomberg
Traders work on the floor of the New York Stock Exchange.
Traders work on the floor of the New York Stock Exchange. Photographer: Jin Lee/Bloomberg
July 12 (Bloomberg) -- Dean Curnutt, chief executive officer of Macro Risk Advisors LLC, talks about the outlook for U.S. markets and global central bank policies. He speaks with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television’s “Surveillance.” (Source: Bloomberg)
July 12 (Bloomberg) -- Stanley Crouch, chief investment officer of Aegis Capital Corp., talks about financial markets and the global economy. He speaks with and Scarlet Fu and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)
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