Concerns on economic growth pull stocks down

Dow Jones:12,089.96 (-61.30) S&P 500:1,286.17 (-13.99) Nasdaq:2,702.56 (-30.44)

US STOCKS fell for a fourth day yesterday amid concern economic growth is slowing and the Federal Reserve will boost capital requirements for the nation’s largest banks.

The S&P 500 fell 1.1 per cent in New York, the lowest level since March 18th. The benchmark gauge for American equities is trading at about 12.2 times its companies’ estimated operating earnings, the cheapest valuation since September, according to data compiled by Bloomberg.

US stocks have fallen for five straight weeks as slower-than-estimated growth in jobs fuelled concern that earnings forecasts are too optimistic.

The S&P 500 rose 2.3 per cent this year. Financial shares had the second-biggest decline in the S&P 500 within 10 industries today, falling 2 per cent. The group is the worst-performing of the 10 main industries in the index this year, down 6.6 per cent.

Bank of America fell 4 per cent to $10.83. Citigroup declined 4.5 per cent to $38.07.

Wells Fargo slumped 2.2 per cent to $26.26. Rochdale Securities LLC’s Richard Bove cut his recommendation to “sell” from “neutral”, citing a poor economic environment, weak housing prices, slowing manufacturing indicators and negative regulatory environment.

Lowe’s lost 2.3 per cent to $22.87. The second-largest US home improvement retailer was cut to “neutral” from “overweight” at JPMorgan Chase and Co, which said that earnings risk was rising.

The five-week drop in US stocks has driven technology company valuations to the lowest level in more than a decade, making them too cheap to pass up for some of the nation’s biggest money managers.

Harley-Davidson climbed 2.8 per cent to $36.86. The largest motorcycle manufacturer in the US posted “solid” sales in April and May even amid weather disruptions and an economic slowdown, and investors should buy the stock on weakness, Wells Fargo analysts said in a note.

The stock is down almost 13 per cent since the end of March.

The S&P 500 will climb to a record over two years after retreating in the next three months, according to Brian Belski of Oppenheimer and Co. Investors will turn to equities as bonds “unwind”, according to Belski. – (Bloomberg)