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Stocks falls after fed boosts rates post katrina Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aIcTnxMTBF3I&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aIcTnxMTBF3I&refer=home
U.S. Stocks Fall After Fed Boosts Rate; D.R. Horton Declines
Sept. 20 (Bloomberg) -- U.S. stocks erased a rally and continued sliding after the Federal Reserve raised its benchmark interest rate for the 11th consecutive time and indicated the ``measured'' pace of increases will persist following the economic damage of Hurricane Katrina.
Homebuilders such as D.R. Horton Inc. and retailers including Kohl's Corp. led the decline amid concern that higher rates and near-record energy prices will restrain consumer spending.
``They could have taken a break here and restarted in a quarter in light of Katrina and that's why the market is reacting negatively,'' said Joe Ranieri, managing director of over-the-counter trading at Adams Harkness Inc. in Boston. ``The Fed is sending us a message that even a one-time pass on interest rates is not in the cards.''
The Standard & Poor's 500 Index lost 9.68, or 0.8 percent, to 1221.34. The Dow Jones Industrial Average was down 76.11, or 0.7 percent, at 10,481.52. The Nasdaq Composite Index fell 13.93, or 0.7 percent, to 2131.33. All three indexes slipped to their lowest in about three weeks.
The S&P 500 had rallied 2.2 percent since Katrina on optimism a possible pause by the Fed would overshadow any economic slowdown from Katrina. Stocks rose earlier today on better-than-expected earnings from Circuit City Stores Inc. and Goldman Sachs Group Inc. and a slide in oil prices.
The central bank said the economy faces only a ``near- term'' setback after the hurricane struck the U.S. Gulf Coast three weeks ago.
``With underlying inflation expected to be contained, the committee believes that policy accommodation can be removed at a pace that is likely to be measured,'' central bankers said in a statement after meeting in Washington. The Fed's next meeting on interest rates is Nov. 1.
Katrina
Today's decision surprised some investors who expected the central bank to signal an end to its increases after Katrina caused an estimated $100 billion in damages, prompting economists to cut their growth forecasts.
They project gross domestic product will expand at a 3.6 percent annual rate this quarter, followed by 3.1 percent in the year's final three months, according to a Bloomberg News survey. That's down from pre-Katrina estimates of 3.1 percent and 3.5 percent, respectively.
Shares of homebuilders retreated as rising rates threaten to curb demand for mortgages and new homes. D.R. Horton, the second-largest builder by stock-market value, slid $1.94 to $34.33. Pulte Homes Inc., the biggest, fell $1.93 to $41.97.
Earlier, a government report showed U.S. housing starts declined more than expected. Builders broke ground on 2.009 million housing units at an annual rate in August, according to the Commerce Department.
Retail Shares
A gauge of retail shares fell 1.8 percent and was the second-biggest drag on the S&P 500 among two dozen groups as higher rates may crimp consumer spending.
Kohl's, a low-price department-store chain, lost $1.56 to $49.90. Home Depot Inc., the nation's biggest home-improvement chain, declined 82 cents to $38.71. Target Corp., the second- largest U.S. discount retailer, fell $1.39 to $50.84.
Telecommunications stocks lost 1 percent. Dividend-paying shares become less attractive in a rising interest-rate environment, and the measure yields 4 percent, twice the payout for the S&P 500 and the biggest among the benchmark's 10 groups.
Crude oil, which reached a record $70.85 last month, surged 7 percent yesterday amid storm fears. Today, futures fell 1.7 percent to $66.23 a barrel in New York as concern eased that Hurricane Rita, which is expected to reach Texas this weekend, would hamper refining and production.
An index of energy shares was the biggest drag on the S&P 500 among two dozen groups. ConocoPhillips, the No. 1 U.S. oil refiner, fell $1.28 to $68.90.
Circuit City
Circuit City Stores Inc., the second-largest U.S. electronics chain, jumped 92 cents, or 5.9 percent, to $16.43 for the best performance in the S&P 500. The company reported second-quarter profit of 1 cent a share. Analysts expected a loss of 3 cents, according to Thomson Financial.
Goldman Sachs Group Inc. slipped 23 cents to $118.05, even after Wall Street's biggest trading firm reported record third- quarter net income of $3.25 a share. That exceeded the average analyst estimate of $2.38 in a Thomson survey.
Companies in the S&P 500 are expected to see average third- quarter earnings growth of 16.1 percent, higher than the average analyst estimate of 15.2 percent at the beginning of September, according to a Bloomberg analysis of Thomson data.
`Stocks Can Rise'
``Yields will be rising, but stocks can rise in the face of that because of gains in profits,'' said Abby Joseph Cohen, chief investment strategist at Goldman, Sachs & Co. in New York.
Almost three stocks fell for every one that advanced on the New York Stock Exchange. Some 1.73 billion shares changed hands on the Big Board, 19 percent more than the three-month daily average.
Procter & Gamble Co., the largest U.S. household-products maker, added 48 cents to $56.04. The company said fiscal first- quarter per-share profit will still be 75 cents to 76 cents, even after Katrina disrupted its Folgers and Millstone coffee businesses.
Shares of companies including U.S. Steel Corp. and Estee Lauder Cos. retreated on disappointing forecasts.
U.S. Steel, the biggest U.S. steelmaker, slumped $2.44 to $42.81. The company said third-quarter profit will be below the ``current range'' of analysts estimates due to increasing natural-gas and scrap costs. U.S. Steel was expected to earn $1.44 a share, on average, according to analysts surveyed by Thomson, with estimates from 89 cents to $1.70.
Estee Lauder
Estee Lauder lost $4 to $36.48. The maker of Clinique and Bobbi Brown cosmetics said earnings in the fiscal first quarter will be ``significantly below'' the same period a year ago, citing rising energy prices, slow sales growth in the Americas and expenses related to investments and stock-based compensation.
Tempur-Pedic International Inc. tumbled $4.68, or 29 percent, to $11.70. The maker of luxury mattresses said net income this year will probably be $1.04 to $1.06 a share, less than a previous forecast of as much as $1.11 a share.
Brunswick Corp., the world's No. 1 builder of recreational boats, slid $5.52, or 13 percent, to $36.98 for the second- steepest decline in the S&P 500. The company cut its 2005 profit forecast to $3.20 to $3.25 a share from as much as $3.40 as higher fuel prices and hurricanes may hurt sales.
Spiders, QQQQs
S&P 500 shares, called Spiders, fell $1.04 to $122.05. Nasdaq-100 tracking shares, known by their QQQQ symbol, slipped 16 cents to $38.93.
S&P 500 futures expiring in December lost 10.40 to 1227.60 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures declined 10 to 1592.
The Russell 2000 Index, which tracks companies with a median market value of $594 million, retreated 1 percent to 660.93. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, fell 95.31, or 0.8 percent, to 12,193.77. Based on changes in the Wilshire, the value of stocks decreased by $119.1 billion.
Brunswick Corp. (BC US)
Circuit City Stores Inc. (CC US)
ConocoPhillips (COP US)
D.R. Horton Inc. (DHI US)
Estee Lauder Cos. (EL US)
Home Depot Inc. (HD US)
Kohl's Corp. (KSS US)
Procter & Gamble Co. (PG US)
Pulte Homes Inc. (PHM US)
Sprint Nextel Corp. (S US)
Target Corp. (TGT US)
Tempur-Pedic International Inc. (TPX US)
U.S. Steel Corp. (X US)
Last Updated: September 20, 2005 17:04 EDT
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