U.S. stocks declined, snapping a two-day advance in the Standard & Poor’s 500 Index, as a surge in Italian borrowing costs deepened concern Europe will struggle to contain its sovereign debt crisis.
Goldman Sachs Group Inc. and Citigroup Inc. (C) fell at least 1.3 percent as European lenders sank. Bank of America Corp. (BAC) slid 1 percent after selling most of its China Construction Bank Corp. stake to boost capital. Boeing Co. (BA) added 2.6 percent after winning the biggest-ever civil jet orders. International Business Machines Corp. (IBM) rose 0.9 percent as Warren Buffett told CNBC that his company, Berkshire Hathaway Inc. (BRK/A), bought a 5.5 percent stake.
The S&P 500 retreated 0.7 percent to 1,254.58 at 9:52 a.m. New York time. The benchmark gauge advanced 2.8 percent during the previous two days. The Dow Jones Industrial Average decreased 41.09 points, or 0.3 percent, to 12,112.59 today as gains in Boeing and IBM helped limit losses.
“Europe’s putting some pressure,” Peter Jankovskis, who helps manage about $2.4 billion at Oakbrook Investments in Lisle, Illinois, said in a telephone interview. “The market will continue to be sensitive to that for quite some time. In the U.S., there’s a good amount of positive news. Maybe people will look at it as a buying opportunity.”
Stocks rose last week, restoring the year-to-date gain for the S&P 500, as improving economic data and leadership changes in Greece and Italy bolstered investor optimism. Equities tumbled on Nov. 9 as yields on Italian government bonds surged, fueling concern European leaders will struggle to fund bailouts.
Italian Bonds
Italy sold 3 billion euros ($4 billion) of five-year bonds, the maximum target, at the highest yield in more than 14 years as Mario Monti seeks to form a new government to restore investor confidence in public finances. Spanish 10-year bonds slid, pushing the yield on the securities to more than 6 percent for the first time since Aug. 5. German Chancellor Angela Merkel called for an overhaul of the European Union, advocating closer political ties and tighter budget rules.
A gauge of European lenders fell 1.5 percent, driving losses in American banks. Goldman Sachs decreased 1.4 percent to $100.28. Citigroup dropped 1.3 percent to $28.95.
Bank of America fell 1 percent to $6.15. The second-biggest U.S. lender by assets sold about 10.4 billion shares in China Construction Bank through private transactions with a group of investors. The sales are expected to generate an after-tax gain of about $1.8 billion, the lender said today. After the closing, the company will own about 1 percent of the common shares of CCB, Bank of America said.
Boeing Rallies
Boeing rallied 2.6 percent to $68.66. The company signed an agreement with Emirates at the Dubai Air show for 50 of its 777-300ER jets and an option for 20 more, in a deal valued at $26 billion. The accord extends their relationship in the wide- body market, with Emirates operating more than 90 of the 777s for the industry’s biggest such fleet.
IBM added 0.9 percent to $189.13. The holding of about 64 million shares was acquired mostly in the third quarter and cost more than $10 billion, Buffett said.
Bank of America’s Savita Subramanian estimates the S&P 500 will rise to 1,350 in 2012, as the U.S. economy avoids a recession and earnings growth continues to push the gauge higher.
Combined profit by companies in the benchmark equity measure will be $98.25 a share this year and $104.50 next year, according to Subramanian, the head of equity and quantitative strategy, in her first equity forecasts since taking over the role from David Bianco in September. The year-end projection is 6.8 percent higher than the S&P 500’s close on Nov. 11.
“While we expect uncertainty and volatility to remain high well into 2012, the avoidance of a U.S. recession and continued earnings growth could drive the S&P 500 toward the high end of its two-year trading range” of 1,100 to 1,365, a team led by Subramanian wrote in a note dated today.
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