Thursday, September 1, 2011

U.S. Stocks Decline Before Report on American Manufacturing; Gap Retreats

U.S. stocks fell, following a four- day rally for the Standard & Poor’s 500 Index, as investors await a report that may show manufacturing in the world’s largest economy shrank for the first time since 2009.

Bank of New York Mellon Corp. (BK), the world’s biggest custody bank, slumped 2.3 percent after saying Chairman and Chief Executive Officer Robert P. Kelly left after a dispute with directors. Gap Inc. (GPS) lost 3.2 percent as sales at its stores open more than one year fell more than what analysts estimated. Ciena Corp. (CIEN) rose 13 percent after reporting a profit.

The S&P 500 dropped 0.2 percent to 1,216 at 9:47 a.m. in New York. The benchmark gauge had rallied 5.1 percent over the previous four trading days. The Dow Jones Industrial Average fell 17.48 points, or 0.2 percent, to 11,596.05.

“We cannot expect anything spectacular as far as the economy goes right now,” Stanley Nabi, New York-based vice chairman of Silvercrest Asset Management Group, which oversees more than $10 billion, said in a telephone interview. “Manufacturing has been fairly erratic. At this stage, we don’t see a double dip, but we see slow growth for a while until we get things moving again. The stock market is cheap, but still has a lot of risk in it.”

Stocks climbed yesterday, capping the S&P 500’s biggest eight-day gain since 2009, after reports showed that U.S. business activity and factory orders expanded at a faster pace than economists had forecast. The gains helped the S&P 500 pare its August decline to 5.7 percent, still the biggest monthly selloff since May 2010.

Recession Concern
The S&P 500 plunged 18 percent from an almost three-year high on April 29 through Aug. 8 as concern grew that the world’s largest economy may relapse into a recession and Europe will fail to contain its debt crisis. The retreat was led by companies whose earnings are most-sensitive to the economy, including financial firms, industrial manufacturers, energy and raw-materials producers.

The index rebounded 8.9 percent from Aug. 8 through yesterday after the plunge dragged its valuation to 12.2 times the reported earnings of its companies, the cheapest level since the bull market began in 2009. Gauges of S&P 500 utilities, raw material producers, health-care companies and financials firms rallied more than 10 percent to lead the recovery, according to data compiled by Bloomberg.

Stock futures swung between gains and losses after a report showed that applications for U.S. unemployment benefits fell last week as the influence of the strike at Verizon Communications Inc. waned, showing the job market is making little headway more than two years after the recession ended.

Manufacturing
U.S. manufacturing probably shrank in August for the first time in two years, economists said before a report today. The Institute for Supply Management’s manufacturing index fell to 48.5 last month from 50.9 in July, according to the median estimate of 80 economists surveyed by Bloomberg News. The dividing line between expansion and contraction is 50, a level that the gauge last fell below in July 2009.

Bank of New York Mellon slumped 2.3 percent to $20.20. Kelly, 57, who had led the world’s biggest custody bank since 2007, left by “mutual agreement” with the board, the company said yesterday in a statement. His successor is Gerald L. Hassell, 59, who has been president of New York-based BNY Mellon since 1998.

Gap lost 3.2 percent to $16. The largest U.S. apparel chain reported sales at its stores open more than one year fell 6 percent, more than the 3.9 percent decline estimated by analysts.

Ciena jumped 13 percent to $13.79. The maker of network gear reported third-quarter earnings of 8 cents a share. Analysts had estimated an 8-cent loss on average.

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