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Dell Leads Most Stocks Down; S&P 500 Edges Up

Wednesday, 17 Aug 2011 06:01 PM

Most U.S. stocks fell Wednesday, wiping out an earlier rally, as Dell Inc. forecast weaker sales and two Federal Reserve officials warned against applying too much stimulus to the economy. Treasuries and commodities climbed, while the dollar slumped.

About 18 stocks retreated for every 17 that advanced on U.S. exchanges. The Standard & Poor’s 500 Index rose 0.1 percent to 1,193.89 at 4 p.m. in New York, after jumping as much as 1.3 percent and falling as much as 0.7 percent. The yield on 30-year Treasury bonds dropped 11 basis points. The S&P GSCI index of 24 commodities advanced 1 percent as oil jumped 1.1 percent. The dollar sank to a three-week low, while the franc strengthened against most of its 16 major peers.

Technology shares fell the most among S&P 500 groups, losing 0.9 percent as Dell said slower spending on PCs and consumer technology crimped its sales forecast. Charles Plosser and Richard Fisher, two Fed officials who dissented from the central bank’s latest policy statement, spoke out against unnecessary stimulus measures. The Swiss National Bank said it will expand liquidity, refraining from tougher moves such as adopting a currency target.

“People started to reevaluate the odds of a QE3,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion, said in a telephone interview. “There are a lot of people that have been saying we’re going to get a QE3,” he said, using a nickname for a third round of quantitative easing. “The fact that Fisher came out today with a very explicit comment brought some selling in. It reduces the odds of a QE3. Dell’s figures are important because they say something about the consumer.”

Dell, HP

The S&P 500 dropped 1 percent Tuesday after rallying 7.5 percent over the three prior days amid a decline in jobless claims, an increase in retail sales and better-than-estimated profits. The index is down 12 percent from April 29 on concern about Europe’s debt crisis and an economic slowdown.

Dell, the second-largest personal-computer maker, sank 10 percent. Lackluster demand from consumers and market-share gains by Apple Inc. weighed on its results, offsetting stronger corporate orders for server computers. Renewed concerns that the economy will fall back into recession also may be curbing spending.

Rival Hewlett-Packard Co. dropped 3.7 percent. The biggest personal-computer maker was cut to “market perform” from “outperform” at BMO Capital Markets. Apple fell less than 0.1 percent while Microsoft Corp. lost 0.4 percent.

Target Corp. gained 2.4 percent. The second-largest U.S. discount retailer said profit jumped 3.7 percent in the second quarter on higher sales.

Economic Stimulus

Per-share earnings increased 17 percent among the S&P 500 companies that have released quarterly results since July 11, according to data compiled by Bloomberg. About three-quarters of the companies have topped the average analyst profit forecast, the data show.

Stocks reversed earlier gains on investor speculation that the Fed may not consider another economic stimulus program to avert a recession. The Fed finished its second round of so- called quantitative easing at the end of June. The program helped propel a rally of as much as 28 percent in the S&P 500 after Fed Chairman Ben S. Bernanke foreshadowed the plan on Aug. 27, 2010.

Bernanke’s pledge last week to keep interest rates near zero percent until mid-2013 was “inappropriate policy at an inappropriate time,” Plosser, president of the Fed Bank of Philadelphia, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Dallas President Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement.

Producer Prices

Stocks rose earlier, after producer prices advanced 0.2 percent in July, following a 0.4 percent drop in June, the Labor Department said today. Economists in a Bloomberg survey forecast a 0.1 increase. The report showed the cost of crude goods dropped in July for a third consecutive month, led by declining petroleum and food prices.

Slowing sales and the drop in raw-materials mean companies will be less likely to raise prices, which may give Fed policy makers more room to act to spur growth after the world’s largest economy almost stalled. Bernanke may announce policy intentions at a conference in Jackson Hole, Wyoming, on Aug. 26.

The extra yield Treasury investors get to hold 30-year bonds instead of two-year notes shrank to the narrowest in a week on speculation the U.S. economic recovery is stalling. The difference between yields on two-year notes and 30-year bonds shrank to 3.37 percentage points at 4:03 p.m. in New York, from 3.48 yesterday. The spread was the narrowest since Aug. 10, when it was the smallest since October 2010.

Oil, Gold, Wheat

The yield on 10-year Treasury notes slipped six basis points to 2.16 percent after rising four basis points earlier.

Crude rose to the highest level in almost two weeks as the dollar fell against the euro, increasing the appeal of dollar- denominated commodities as an investment. Futures climbed as much as 2.7 percent before trimming their advance to settle 1.1 percent higher, following an unexpected increase in U.S. inventories.

Gold advanced to a record for the second day, gaining 0.5 percent to settle at $1,793.80. Copper increased. Wheat futures climbed 0.8 percent to a two-month high on speculation that dry weather in the U.S. Great Plains will cut acreage of winter crops set to be planted next month.

Sarkozy, Merkel

In Europe, Carlsberg A/S sank 17 percent as the world’s fourth-largest brewer cut its profit forecast because of faltering sales in Russia. Deutsche Boerse AG lost 5.8 percent and London Stock Exchange Group Plc fell 2.8 percent after French President Nicolas Sarkozy said France and Germany will propose a financial-transaction tax.

German Chancellor Angela Merkel and Sarkozy rejected an expansion of a 440 billion-euro ($633 billion) rescue fund Tuesday and rebuffed calls for joint euro borrowing.

The MSCI Emerging Markets Index rose 0.6 percent. Russia’s Micex Index added 1.9 percent, and India’s Sensex Index climbed 0.7 percent. Dell suppliers in Taiwan slid, helping to push the Taiex Index down 0.7 percent. Quanta Computer Inc. sank 4.3 percent and Compal Electronics Inc. dropped 4 percent.

The dollar reached a three-week low versus a basket of currencies of major U.S. trading partners. The Dollar Index lost 0.4 percent, after touching its lowest level since July 27.

Swiss Franc Gains

The franc rose against most of its major peers. The currency advanced 0.8 percent against the dollar and 0.6 percent versus the euro. The Swiss National Bank said it will expand banks’ sight deposits to 200 billion francs ($253 billion) from 120 billion francs. It will also continue to repurchase outstanding SNB bills and use foreign-exchange swap transactions.

The yield on two-year Greek notes rose 55 basis points to 34.98 percent. Portuguese two-year securities yielded 11.85 percent, up eight basis points from yesterday. The cost of insuring sovereign debt increased, with the Markit iTraxx SovX Western Europe Index of credit-default swaps linked to 15 governments climbing one basis point to 278 basis points.

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Most U.S. stocks fell Wednesday, wiping out an earlier rally, as Dell Inc. forecast weaker sales and two Federal Reserve officials warned against applying too much stimulus to the economy. Treasuries and commodities climbed, while the dollar slumped.About 18 stocks...
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2011-01-17
Wednesday, 17 Aug 2011 06:01 PM
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