U.S. stocks fell, extending the longest slump since 1978 for the Dow Jones Industrial Average, as concern the economy is slowing overshadowed the cheapest equity valuations in a year.
Caterpillar Inc. led the Dow lower, falling 3.1 percent. Chevron Corp. lost 2.1 percent as oil prices tumbled following a government report showing a increase in stockpiles. A gauge of health-care stocks in the Standard & Poor’s 500 Index lost 1.6 percent. MasterCard Inc. (MA), the second-biggest payments network, advanced 5.5 percent after profit rose 33 percent as customers’ spending increased.
The Dow dropped for a ninth straight day, losing 137.48 points, or 1.2 percent, to 11,729.14 at 10:51 a.m. in New York. The S&P 500 tumbled 1.3 percent to 1,238.26 after erasing its 2011 gain yesterday in a seventh straight decline.
“Valuation is compelling, corporate earnings are compelling, but the economic environment is challenging” said David Sowerby, a Bloomfield Hills, Michigan-based money manager at Loomis Sayles & Co., which oversees $155 billion. “I’d say that we have between now and year-end about a 9 percent to 10 percent upside in the S&P 500. The question is -- what will the ride be like between now and year-end? What you need to happen is that the economy improves.”
Growing concern that the U.S. economy is faltering has erased $1.07 trillion from American equities in less than two weeks, according to data compiled by Bloomberg. The S&P 500 plunged 2.6 percent yesterday, its biggest one-day loss in a year and giving the index the longest losing streak since October 2008, in the depths of the financial crisis caused by Lehman Brothers Holdings Inc.’s bankruptcy.
Shifting Attention
Investors sought the safety of Treasuries yesterday even as President Barack Obama signed a plan to raise the federal debt limit, avoiding an American default. Attention has shifted from the political drama in Washington to weakening economic data.
Stocks fell today as a report showed service industries expanded in July at the slowest pace since February 2010 as orders and employment cooled. The Institute for Supply Management’s index of non-manufacturing businesses decreased to 52.7 in July from 53.3 a month earlier. A reading above 50 signals expansion. The measure was projected to rise to 53.5, according to the median forecast in a Bloomberg News survey.
Companies in the U.S. added 114,000 workers to payrolls in July, according to figures from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000. The data comes two days before a government report projected to show an increase of 85,000 jobs.
Biggs’s ’Strong Buy’
U.S. stocks have become a “strong buy” following declines in the past seven days, according to Barton Biggs, managing partner and co-founder of Traxis Partners LP in New York. Biggs spoke on Bloomberg Television’s “InsideTrack” with Erik Schatzker and Deirdre Bolton.
Per-share earnings increased 17 percent and sales rose 12 percent among the S&P 500 companies that have released quarterly results since July 11, according to data compiled by Bloomberg. About 72 percent of the 359 companies have topped the average analyst profit forecast, the data show. The S&P 500 sold for 13.8 times reported earnings at the start of today’s session, the cheapest level since July 2010.
Energy shares lost the most among 10 groups in the S&P 500, declining 2.3 percent. Chevron dropped 2.1 percent to $101.33 as the Energy Department reported U.S. stockpiles increased more than forecast last week.
MasterCard rallied 5.5 percent to $315.01. Net income rose to $608 million, or $4.76 a share, from $458 million, or $3.49, in the same period a year earlier. The average estimate of 29 analysts surveyed by Bloomberg was for $4.23 a share.
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