U.S. Stocks Retreat as Treasuries, Dollar Gain on Housing Data

Bloomberg:

  U.S. stocks fell, Treasuries gained and the dollar strengthened against the euro after reports showed American housing starts declined the most in 14 months and FedEx Corp.’s profit forecast trailed estimates. Oil rose to a six-week high.

The Standard & Poor’s 500 Index slipped 0.1 percent to 1,114.61 at 4 p.m. in New York as about three stocks slumped for every two that rallied on U.S. exchanges. The measure had fallen as much as 0.7 percent earlier. Yields on 10-year Treasuries lost 4 basis points to 3.26 percent. The U.S. currency climbed 0.2 percent to $1.2312. Crude oil futures rose 0.9 percent to $77.67 a barrel.

Retailers, manufacturers, transportation companies and commodity producers dropped in U.S. stock trading as FedEx’s full-year profit outlook and the biggest drop in housing starts since March 2009 overshadowed better-than-estimated growth in industrial production. BP Plc’s 1.4 percent gain in New York equity trading following an agreement to pay $20 billion to victims of the Gulf of Mexico oil spill wasn’t enough to turn the S&P 500 around.

“The recovery is not accelerating, it’s decelerating, and there’s reasons for investors to take a step back and evaluate,” said David Kovacs, head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $19 billion. FedEx “is a barometer of economic activity, and the fact that they missed relative to estimates indicates there are some clouds on the horizon.”

‘Moderate’ Recovery

FedEx, the world’s largest air-cargo carrier, declined 6 percent in U.S. stock trading for the biggest drop since December. The company forecast annual profit that trailed the average analyst estimate as labor costs climb in a “moderate” economic recovery. Indexes of consumer stocks in the S&P 500 lost more than 0.5 percent.

Fannie Mae and Freddie Mac, the mortgage firms 80 percent owned by U.S. taxpayers, plunged after regulators told them to delist their common and preferred shares from the New York Stock Exchange. Fannie Mae dropped 39 percent and Freddie Mac slumped 38 percent.

Speculation that BP would put the $20 billion into an escrow account helped its shares as well as the S&P 500 recover from losses. BP maintained gains even after canceling its $10- billion-a-year dividend for the first three quarters of 2010.

Credit investors are pricing in a 36 percent chance BP Plc will default within five years as it tangles with the Obama administration over cleanup costs and claims for the biggest oil spill in U.S. history.

Posted via email from Jim Nichols