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Gold and stocks decline { April 2006 } Original Source Link: (May no longer be active)
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U.S. Stocks Decline on Commodities Prices; Alcoa, Exxon Slump
May 22 (Bloomberg) -- U.S. stocks declined, extending the market's worst two-week slump in more than three years. Falling commodity prices hurt producers such as Alcoa Inc., U.S. Steel Corp. and Exxon Mobil Corp.
Gold and other metals slid for a fourth day and oil prices tumbled to a six-week low. Energy and producers of raw materials had the biggest declines in the Standard & Poor's 500 Index.
Investors are concerned that the Federal Reserve will raise interest rates too far and slow the economy. A report last week showed consumer prices rose more than economists forecast, fueling speculation inflation is accelerating.
``When the fever breaks, you can always see some pretty nasty selloffs,'' said Ed Yardeni, chief investment strategist at Oak Associates Ltd., which manages $3.5 billion in Akron, Ohio. ``The higher you go, the chance that it's a speculative spike increases.''
The S&P 500 Index dropped 5.57, or 0.4 percent, to 1261.46 as of 12:11 p.m. in New York. The Dow Jones Industrial Average fell 27.68, or 0.3 percent, to 11,116.38. The Nasdaq Composite Index lost 19.65, or 0.9 percent, to 2174.23.
Stocks have lost almost $1 trillion in value since May 5, based on the decline in the Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares.
Markets in Europe and Asia declined today, sending the Morgan Stanley Capital International World Index lower for the ninth day, the longest losing streak since March 2005. The MSCI index of emerging markets declined for the 10th day, the longest slump since August 1998.
McManus
Wall Street strategists came out today and defended equities. Banc of America Securities LLC Chief Investment Strategist Thomas McManus raised his asset-allocation for stocks to 60 percent to 55 percent, cutting cash by 5 percent. ``Fear has risen,'' the strategist wrote in a note to clients. ``A number of large-capitalization `quality' stocks are underpriced relative to the market.''
Commodity prices had their biggest weekly decline in more than 25 years on speculation that higher rates will damp economic growth. Gold reached a 26-year high on May 12, while other commodities also reached multi-decade highs or records this month.
Metal Prices
Gold fell 0.9 percent and silver slipped 1.1 percent in New York today.
Alcoa, the world's largest aluminum maker, lost $1.36 to $30.62. Newmont Mining Corp., the biggest gold producer last year, slid $1.69 to $49.38, and Phelps Dodge Corp., the No. 3 copper producer, retreated $3.88 to $79.18.
Steel stocks also tumbled. U.S. Steel Corp., the largest U.S.-based steelmaker by sales, slid $3.72 to $60.28.
Materials companies in the S&P 500 dropped 3 percent, the biggest decline among 10 groups in the index.
Crude oil for June delivery slumped as much as 1.6 percent to $67.42 a barrel in New York. Prices dropped 4.9 percent last week, the biggest decline since March.
Exxon, the biggest oil company in the world by market value, lost 36 cents to $60.09. ConocoPhillips, the No. 3 U.S. oil company, dropped $1.12 to $61.60.
S&P energy shares fell 1.9 percent, for the second-worst performance in the index.
Inflation Concern
``The market is going through a selloff partly because there's been a couple modest whiffs of inflation,'' said Keith Wirtz, who helps manage $22 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. ``The market's torn trying to anticipate where the leadership is going to come the next six to nine months.''
Consumer prices increased 0.6 percent in April following a 0.4 percent gain in March, the Labor Department said May 17. Excluding food and energy, so-called core prices rose 0.3 percent. Economists expected 0.5 percent and 0.2 percent, respectively.
More evidence later this week that U.S. economic growth is accelerating may push the Fed to raise rates further.
The U.S. economy expanded at an annual pace of 5.8 percent in the first quarter, higher than the initial growth reading of 4.8 percent from the Commerce Department in April, according to economists surveyed by Bloomberg News. That would be the fastest since the third quarter of 2003. The report is expected May 25.
About 11 stocks fell for every three that rose on the New York Stock Exchange. Some 970 million shares changed hands on the Big Board, 16 percent more than the same time a week ago.
NYSE Shares
NYSE Group Inc. shares fell $3.55 to $60.95 after the owner of the New York Stock Exchange offered 8 billion euros ($10.2 billion) in cash and stock for Euronext NV, Europe's No. 2 stock exchange. Euronext investors would receive stock in the new company and 21.32 euros in cash for each share, the NYSE said. The combination would create the first transatlantic securities market.
Lowe's Cos. fell $2.59 to $60.05. The second-largest U.S. home-improvement retailer lowered its forecast for full-year sales growth to about 13 percent from as much as 14 percent and its estimate for sales growth at stores open at least a year to 4 percent to 5 percent, from 5 percent to 6 percent. First-quarter profit rose more than analysts expected as consumers spent more on remodeling.
KLA-Tencor Corp. dropped $2.80, or 6.2 percent, to $42.44 for the No. 3 drop in the S&P 500. Needham & Co. analyst Robert Maire cut the No. 1 maker of machines that test semiconductors during production to ``hold'' from ``buy,'' saying questions about the timing of the company's stock-option grants will put ``significant pressure for a long period of time'' on the shares.
Bausch & Lomb
Bausch & Lomb Inc. lost 80 cents to $49.25. The maker of a contact lens cleaner that's been linked to a potentially blinding eye infection has received a notice from the Internal Revenue Service of liability for the 1999 tax year. The company said adjustments, if sustained in full, may increase liabilities by more than $200 million.
Shares of Yahoo! Inc. bucked today's trend, gaining 84 cents to $30.37. The owner of the most-visited U.S. Internet site may see its stock price climb 70 percent on the company's redesigned Web site and its Japanese unit, Barron's said, based on analysis by Gamco Investors Inc.'s Larry Haverty.
Last Updated: May 22, 2006 12:19 EDT
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