US stocks fell, adding to the worst week for global equities since the September 2001 terrorist attacks, after the unemployment rate reached the highest level in five years.
Macy’s Inc, Freeport-McMoRan Copper & Gold Inc and WellPoint Inc fell more than 2 per cent each after payrolls shrank by a higher-than-projected 84,000 in August. Merrill Lynch & Co slipped 1.3 per cent as Goldman Sachs Group Inc advised clients to sell shares of the third-largest US securities firm on the likelihood of more writedowns.
The Standard & Poor’s 500 Index more than halved its retreat after Reuters reported Blackstone Group LP and Kohlberg Kravis Roberts & Co may buy parts of Lehman Brothers Holdings Inc asset management business.
“The concern over the earnings outlook for 2009 is well founded,” Mario Gabelli, who oversees $28.3 billion as the chief executive officer of Gamco Investors Inc, told Bloomberg Television. “The US consumer is greater than China, Russia, India and Brazil in terms of the impact. As we’re slowing down, we’re slowing down the world. The consumer has been in a recession since November of 2007.”
The Standard & Poor’s 500 Index lost 9.23 points, or 0.8 per cent, to 1,227.6 at 12:21 pm in New York. The drop was limited by a 2.8 per cent gain in Lehman. The Dow Jones Industrial Average fell 59.52, or 0.5 per cent, to 11,128.71. The Nasdaq Composite Index decreased 23.44 to 2,225.6. About four stocks fell for each that rose on the New York Stock Exchange.
Weekly Drop: The S&P 500 lost 4.4 per cent so far this week and is down 16 per cent in 2008. The benchmark index for American equities has fallen for five straight days, its longest losing streak since January. The week’s losses threatened to erase the S&P 500’s rebound from an almost three-year low set on July 15. The index is up 1 per cent since then after rebounding as much as 7.4 per cent. The MSCI World Index fell 6.1 per cent this week.
More From This Section
Today’s report showing an unemployment rate of 6.1 per cent added to concern that the worst housing slump since the Great Depression and more than $500 billion in credit losses and writedowns at global banks are dragging the nation into a recession. Indexes of commodity and energy producers tumbled more than 7 per cent this week amid expectations slowing growth will curb demand for oil and metals.
Treasuries rose and the dollar fell against the yen.
Merrill Lynch & Co, down 53 per cent this year in New York trading, sank 31 cents to $25.90. Goldman added the company to its “conviction sell” list and lowered its share-price projection by 23 per cent to $22.
In The Numbers: Stocks “aren’t likely to go up until we see some kind of turn in the economy and that turn wasn’t in today’s numbers,” said John Davidson, president of PartnerRe Asset Management Corp, which oversees $12 billion in Greenwich, Connecticut. “Earnings expectations are going to have to be revised lower.”
UST Inc added 22 per cent to $66.05. Altria Group Inc, largest US cigarette maker, is in talks to buy the nation’s biggest snuff producer for more than $10 billion, the New York Times reported, citing people with knowledge of the discussions who weren’t identified.
Europe, Asia: Stocks in Europe and Asia fell today on concern weakening economic growth will curb earnings at semi-conductor makers while credit-related losses at banks increase.
“We’re clearly in a bear market,” Simon Moss, who manages the equivalent of $4.1 billion as investment director of US equities at Scottish Widows Investment Partnership in Edinburgh, said in a Bloomberg Television interview. “There is no doubt the economy is slowing.”
The employment report spurred investors to increase bets the Federal Reserve will hold interest rates steady for the rest of the year. Odds policy makers will leave the target rate for overnight loans between banks unchanged through January rose to 74 per cent from 63 per cent yesterday, futures trading shows.
The average price-earnings multiple of the S&P 500 has declined more than 5 per cent from a five-year high of 26.2 on Aug 15. The index is trading for 24.72 times profits in the last 12 months, or 14.6 times analysts’ earnings estimates.
Companies in the S&P 500 are forecast to report profits in the fourth quarter that are 42 per cent higher than a year ago, the biggest increase ever. Financial company earnings are projected to rise more almost five-fold, while income at mining and chemical companies may increase 35 per cent.