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Investors hunt defensive stocks as rally stalls
Source: Agencies |
May 13, 2009, Wednesday
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Online Edition
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INVESTORS were hard-pressed yesterday to find a reason to extend Wall Street's two-month rally.
Stocks fluctuated but mostly fell as investors shifted into defensive corners of the market, driving up shares of drugmakers like Pfizer Inc. and drink maker Coca-Cola Inc., which tend to hold up better in economic downturns.
The back-and-forth moves come as some traders worry that the economic recovery won't be as brisk as hoped when stocks were carving big gains over the past eight weeks. The Dow Jones industrials rose about 45 points, while broader indicators fell.
With little news to excite investors, the financial stocks that pounded the market to 12-year lows in March and then led the bounce higher fell for a second day. Even after sliding on Monday, bank shares have roughly doubled since early March, as measured by the KBW Bank Index. The huge advance has some analysts saying those stocks are overdue for more selling.
Investors also pulled money from technology stocks after the Nasdaq composite index closed at a six-month high last week.
Retailers fell ahead of a government report on retail sales due out Wednesday and in advance of quarterly results coming out from Macy's Inc. on Wednesday and Wal-Mart Stores Inc. on Thursday.
Consumer spending accounts for more than two-thirds of U.S. economic activity so investors will be eager for forecasts from retailers for insight into whether the economy is stabilizing as many traders have been betting.
Analysts said a break in the market's ascent had been overdue after the Standard & Poor's 500 index jumped more than 35 percent since early March. The run came as economic and corporate reports signaled the economy could be stabilizing, though in many cases not improving.
"We need to see not just the promise of recovery, but actual data," said Uri Landesman, head of global growth strategies at ING Investment Management. "The worst of the bear market is certainly behind us, but it doesn't mean it's going to be straight up."
In late afternoon trading, the Dow rose 44.37, or 0.5 percent, to 8,463.14 after falling 155 on Monday. The S&P 500 index fell 4.08, or 0.5 percent, to 905.16 and the Nasdaq composite index fell 20.39, or 1.2 percent, to 1,710.85.
Matt Lloyd, chief investment strategist at Advisors Asset Management Inc., said investors have only hit pause, not stop on the rally and that a slowdown in the climb after the surge from March is healthy.
"We need to kind of walk at a brisk pace as opposed to sprint," he said.
The market retreated Monday after four banks announced plans to raise capital by selling common stock. Investors were nervous about the added shares in the market even as it was a welcome sign to see banks turn to Wall Street to raise money instead of relying on government bailouts. The extra supply of shares in circulation could push prices lower.
Some banks selling stock fell for a second day. Regions Financial tumbled 65 cents, or 11 percent, to US$5.27 after falling 9.3 percent Monday.
Detroit also attention of investors worried about seeing the value of shares diluted. Ford Motor Co. announced plans to raise cash through a common stock offering. Unlike General Motors Corp. and Chrysler LLC, Ford has been able to avoid needing government aid amid a sharp downturn in auto sales. Chrysler has filed for bankruptcy protection and GM is working on turnaround plans to help it avoid bankruptcy.
Ford fell 64 cents, or 10.5 percent, to US$5.44.
GM shares tumbled to their lowest level since 1933 as investors worried that their shares would lose value if more are issued or the company declares bankruptcy. The company faces a June 1 restructuring deadline.
The automaker's shareholders would be competing with bondholders, the U.S. government and the UAW for stock if the company is reorganized.
GM, one of the 30 stocks that make up the Dow industrials, fell 32 cents, or 22 percent, to US$1.12.
In other trading, Dow-components Pfizer rose 72 cents, or 5.1 percent, to US$14.87, while Coca Cola rose US$1.45, or 3.4 percent, to US$44.20.
Homebuilders fell after the National Association of Realtors said home prices slid in nearly nine out of every 10 U.S. cities in the first three months of the year as first-time buyers in search of bargains dominated the market.
Pulte Homes Inc. fell 79 cents, or 7 percent, to US$10.44, while Toll Brothers Inc. fell 63 cents, or 3.1 percent, to US$19.67.
Energy stocks rose as crude rose above US$60 a barrel for the first time since early November. Light, sweet crude recently changed hands up 4 cents at US$58.54 per barrel on the New York Mercantile Exchange.
Exxon Mobil Corp. rose 1.44, or 2.1 percent, to US$70.71, while Schlumberger Ltd. rose US$1.18, or 2.2 percent, to US$55.95.
In other trading, the Russell 2000 index of smaller companies fell 12.26, or 2.4 percent, to 489.68 after a rally Friday vaulted it in the black for the year.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.07 billion shares.
Bond prices edged higher after the Federal Reserve bought about US$6 billion in government debt as part of its effort to drive down interest rates and reduce the costs of loans like mortgages.
The yield on the benchmark 10-year Treasury note slipped to 3.16 percent from 3.17 percent late Monday.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Britain's FTSE 100 slipped 0.2 percent, Germany's DAX index lost 0.3 percent, and France's CAC-40 fell 0.5 percent. Japan's Nikkei stock average fell 1.6 percent.
Stocks fluctuated but mostly fell as investors shifted into defensive corners of the market, driving up shares of drugmakers like Pfizer Inc. and drink maker Coca-Cola Inc., which tend to hold up better in economic downturns.
The back-and-forth moves come as some traders worry that the economic recovery won't be as brisk as hoped when stocks were carving big gains over the past eight weeks. The Dow Jones industrials rose about 45 points, while broader indicators fell.
With little news to excite investors, the financial stocks that pounded the market to 12-year lows in March and then led the bounce higher fell for a second day. Even after sliding on Monday, bank shares have roughly doubled since early March, as measured by the KBW Bank Index. The huge advance has some analysts saying those stocks are overdue for more selling.
Investors also pulled money from technology stocks after the Nasdaq composite index closed at a six-month high last week.
Retailers fell ahead of a government report on retail sales due out Wednesday and in advance of quarterly results coming out from Macy's Inc. on Wednesday and Wal-Mart Stores Inc. on Thursday.
Consumer spending accounts for more than two-thirds of U.S. economic activity so investors will be eager for forecasts from retailers for insight into whether the economy is stabilizing as many traders have been betting.
Analysts said a break in the market's ascent had been overdue after the Standard & Poor's 500 index jumped more than 35 percent since early March. The run came as economic and corporate reports signaled the economy could be stabilizing, though in many cases not improving.
"We need to see not just the promise of recovery, but actual data," said Uri Landesman, head of global growth strategies at ING Investment Management. "The worst of the bear market is certainly behind us, but it doesn't mean it's going to be straight up."
In late afternoon trading, the Dow rose 44.37, or 0.5 percent, to 8,463.14 after falling 155 on Monday. The S&P 500 index fell 4.08, or 0.5 percent, to 905.16 and the Nasdaq composite index fell 20.39, or 1.2 percent, to 1,710.85.
Matt Lloyd, chief investment strategist at Advisors Asset Management Inc., said investors have only hit pause, not stop on the rally and that a slowdown in the climb after the surge from March is healthy.
"We need to kind of walk at a brisk pace as opposed to sprint," he said.
The market retreated Monday after four banks announced plans to raise capital by selling common stock. Investors were nervous about the added shares in the market even as it was a welcome sign to see banks turn to Wall Street to raise money instead of relying on government bailouts. The extra supply of shares in circulation could push prices lower.
Some banks selling stock fell for a second day. Regions Financial tumbled 65 cents, or 11 percent, to US$5.27 after falling 9.3 percent Monday.
Detroit also attention of investors worried about seeing the value of shares diluted. Ford Motor Co. announced plans to raise cash through a common stock offering. Unlike General Motors Corp. and Chrysler LLC, Ford has been able to avoid needing government aid amid a sharp downturn in auto sales. Chrysler has filed for bankruptcy protection and GM is working on turnaround plans to help it avoid bankruptcy.
Ford fell 64 cents, or 10.5 percent, to US$5.44.
GM shares tumbled to their lowest level since 1933 as investors worried that their shares would lose value if more are issued or the company declares bankruptcy. The company faces a June 1 restructuring deadline.
The automaker's shareholders would be competing with bondholders, the U.S. government and the UAW for stock if the company is reorganized.
GM, one of the 30 stocks that make up the Dow industrials, fell 32 cents, or 22 percent, to US$1.12.
In other trading, Dow-components Pfizer rose 72 cents, or 5.1 percent, to US$14.87, while Coca Cola rose US$1.45, or 3.4 percent, to US$44.20.
Homebuilders fell after the National Association of Realtors said home prices slid in nearly nine out of every 10 U.S. cities in the first three months of the year as first-time buyers in search of bargains dominated the market.
Pulte Homes Inc. fell 79 cents, or 7 percent, to US$10.44, while Toll Brothers Inc. fell 63 cents, or 3.1 percent, to US$19.67.
Energy stocks rose as crude rose above US$60 a barrel for the first time since early November. Light, sweet crude recently changed hands up 4 cents at US$58.54 per barrel on the New York Mercantile Exchange.
Exxon Mobil Corp. rose 1.44, or 2.1 percent, to US$70.71, while Schlumberger Ltd. rose US$1.18, or 2.2 percent, to US$55.95.
In other trading, the Russell 2000 index of smaller companies fell 12.26, or 2.4 percent, to 489.68 after a rally Friday vaulted it in the black for the year.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.07 billion shares.
Bond prices edged higher after the Federal Reserve bought about US$6 billion in government debt as part of its effort to drive down interest rates and reduce the costs of loans like mortgages.
The yield on the benchmark 10-year Treasury note slipped to 3.16 percent from 3.17 percent late Monday.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Britain's FTSE 100 slipped 0.2 percent, Germany's DAX index lost 0.3 percent, and France's CAC-40 fell 0.5 percent. Japan's Nikkei stock average fell 1.6 percent.
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