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Stocks biggest drop four weeks after oil hike Original Source Link: (May no longer be active)
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U.S. Stocks Decline on Oil, Greenspan; Citigroup Shares Fall
Nov. 19 (Bloomberg) -- U.S. stocks had their biggest drop in four weeks as oil prices surged and Federal Reserve Chairman Alan Greenspan said the record current-account deficit may cause foreign investors to sell dollar-denominated assets.
Citigroup Inc. led a retreat in financial shares on concern higher interest rates will be necessary to attract overseas investment. Applied Materials Inc. paced a decline in shares of semiconductor-equipment makers.
``Foreign investors are scared of the dollar; they don't invest in stocks and they may even sell because they think the dollar's got further'' to drop, said Mort Cohen, chief executive of the Clarion Group, which manages $200 million in Cleveland. ``It's driving the market down.''
The Dow Jones Industrial Average fell 115.64 to 10,456.91. The 1.1 percent drop was its biggest since Oct. 22. The Standard & Poor's 500 Index lost 13.21, or 1.1 percent, to 1170.34. The Nasdaq Composite Index slid 33.65, or 1.6 percent, to 2070.63.
The S&P 500 declined 1.2 percent this week, following its best three-week rally in two years. The Dow average, which closed at an eight-month high yesterday, lost 0.8 percent this week because of today's drop. The Nasdaq slipped 0.7 percent this week after rising for the previous four.
About five stocks fell for every three that rose on the New York Stock Exchange. Some 1.5 billion shares changed hands on the Big Board, 11 percent more than the three-month daily average.
Oil Prices Soar
Crude futures for December delivery had their biggest rise in five months, soaring 4.8 percent to $48.44 a barrel in New York on concern cold weather in Europe will cause increased demand for heating oil.
The dollar sank today to its lowest in more than four years against the yen and dropped versus the euro after Greenspan said foreign investors will tire of financing the record current- account deficit, the widest measure of trade.
``A diminished appetite for adding to dollar balances must occur at some point,'' Greenspan said at the European Banking Congress in Frankfurt. ``International investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns.''
Greenspan's comments sent the two-year U.S. Treasury note's yield to its highest since July 2002 and sparked a decline in financial shares on concern an increase in borrowing costs would hurt demand for loans.
Financials, Homebuilders
An index of financial stocks in the S&P 500 shed 1.6 percent, with all of its 25 members declining except for one. Morgan Stanley, the No. 2 U.S. securities firm, slid $1.32 to $52.26. Citigroup, the world's biggest financial services company, lost 76 cents to $45.15.
Homebuilders fell as higher borrowing costs may lead to a decline in home sales. Centex Corp., the fourth-largest U.S. homebuilder by stock market value, lost $1.06 to $54.15. Pulte Homes Inc., the third-biggest, shed $1.64 to $56.37.
Today's fall shouldn't mark the end of a rally that last week lifted the S&P 500 to its highest since Aug. 2001, said Nathaniel Paull, who helps manage $3.5 billion at New Amsterdam Partners in New York.
``The economic backdrop is still really solid and there's good earnings growth,'' he said. ``The holiday season looks like it will be fine, and you probably get an end-of-year positive tone to the market.''
The Labor Department reported this month that the U.S. economy in October created the most jobs since March. Profit at companies in the S&P 500 increased, on average, by 17 percent in the third quarter, compared with a quarterly average over the past 20 years of 7 percent.
Analyst Call
An index of 19 semiconductor-related companies in the S&P 500 dropped 3 percent, for the biggest decline among the benchmark's 24 industry groups.
Semiconductor-equipment shares may fall through the middle of 2005 in part because the chip industry has ``excess capacity'' and faces a ``disappointing'' environment next year, wrote Goldman, Sachs & Co. analyst James Covello, in a note to clients.
Applied Materials shed 66 cents to $16.99. The world's biggest maker of semiconductor-production equipment was reduced to ``underperform'' from ``in-line'' by Covello. Novellus Systems Inc., the No. 3 maker of semiconductor equipment, lost 89 cents to $27.57.
Amazon.com Inc., the world's largest Internet retailer, lost $1.82 to $38.55. ``We do not expect as much growth or operating leverage as the market expects,'' wrote Banc of America analyst Aram Rubinson, in a note to clients. He initiated coverage of the stock with a ``sell'' rating.
Retailers
Urban Outfitters Inc. fell $2.21 to $43.45. The clothing retailer was cut to ``hold'' from ``buy'' by Smith Barney analyst Kimberly Greenberger. Shares of AnnTaylor Stores Corp. shed 65 cents to $22.57 after Greenberger reduced the stock to ``sell'' from ``hold.'' The analyst said in a note to clients there was a ``generally sober'' tone for November retail sales.
Novell Inc., a seller of network-software and consulting services, dropped 54 cents to $6.59 after saying revenue last quarter was $300.7 million, less than the $304.1 million expected by analysts in a Thomson Financial survey.
Mylan Laboratories Inc. jumped $1.72, or 10 percent, to $18.88, for the second-biggest increase in the S&P 500. The No. 1 U.S. maker of generic drugs received a $20-a-share bid from Carl Icahn, the company's largest investor and a critic of Mylan's plan to buy King Pharmaceuticals Inc. for $4 billion.
Autodesk Inc. climbed $3.05 to $63.70. The company, whose software is used to design buildings and create visual effects for movies, said third-quarter net income, excluding some costs, was 38 cents a share. Analysts expected 34 cents, the average estimate in a Thomson Financial survey.
General Motors
General Motors Corp. shed 98 cents to $38.90. The world's largest automaker's Saturn unit recalled 197,311 Ion sedans in the U.S. and Canada to fix turn signals and daytime running lights. General Motors has accounted for at least 9.6 million of the more than 25 million vehicle recalls in the U.S. this year.
Sirius Satellite Radio Inc. jumped 45 cents to $5.17. The subscription-radio company said it named former Viacom Inc. President Mel Karmazin as chief executive officer.
UnumProvident Corp., the largest U.S. disability insurer, advanced $1.62 to $15.35. Its 12 percent increase was the biggest in the S&P 500. The company settled with state and federal regulators who were investigating allegations the company improperly stopped paying benefits to clients.
Last Updated: November 19, 2004 16:52 EST
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