U.S. Stocks Fluctuate as Greenspan Says Housing May Recover
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By Elizabeth Stanton
May 12 (Bloomberg) -- U.S. stocks fluctuated as former Federal Reserve Chairman Alan Greenspan said housing may be on the verge of recover, helping the market recover from an early slide spurred by concern share sales will dilute earnings.
Financial shares in the Standard & Poor’s 500 Index reversed most of a 4.7 percent decline after Greenspan told a conference that companies are able to raise more capital than they expected. Pfizer Inc. led gains in the Dow Jones Industrial Average after Credit Suisse Group AG said the company may boost its dividend after taking over Wyeth. Exxon Mobil Corp. led energy shares higher as oil climbed to a six-month high.
The S&P 500 slipped less than 0.1 percent to 909.19 at 3:48 p.m. in New York. The Dow added 60.54 points, or 0.7 percent, to 8,479.31. European and Asian stocks declined.
The market’s earlier retreat came after Ford Motor Co., U.S. Bancorp and Anadarko Petroleum Corp. either raised capital in share sales or said they planned to do so.
The S&P 500 last week rose 5.9 percent, erasing this year’s loss, as results from the government’s stress tests of banks reassured investors and the pace of job cuts slowed in April. The measure’s 37 percent jump from March 9 through May 8 is the most over similar spans since the 1930s.
Pfizer added 5.8 percent to $14.97. Credit Suisse Group AG analysts said Pfizer’s purchase of Wyeth will boost the drugmaker’s earnings and sales outlook after the patent on its blockbuster cholesterol drug Lipitor expires and may result in a dividend increase, Credit Suisse analysts said. The company may also look to lower financing costs for the purchase, the analysts said.
S&P 500 health-care companies climbed 1.4 percent and contributed the most to the index’s advance.
Energy Gains
Exxon, the world’s largest oil company, rallied 2.5 percent to $70.98. Halliburton Co., the world’s second-largest oilfield services provider, climbed 3.2 percent to $22.99.
S&P 500 energy producers climbed 1.2 percent as a group. Crude oil for June delivery rose 33 cents, or 0.6 percent, to $58.83 a barrel in New York.
Fluor Corp. gained 5.7 percent to $45.69 for the second- biggest advance in the S&P 500 after Pfizer. The largest publicly traded U.S. engineering firm reported first-quarter earnings excluding some items of $1.12 a share, beating the average analyst estimate by 21 percent.
Equity Offerings
Ford sank 13 percent to $5.28. The second-largest U.S. automaker said it will issue 300 million shares of common stock in a public offering and use at least some of the money for a union-run medical trust. General Motors, which tumbled yesterday after executives said bankruptcy is more probable, lost 24 percent to $1.10.
Ford’s new shares will be priced today, according to Bloomberg data. Ford had 2.8 billion shares outstanding as of May 1, so the new stock would be an 11 percent increase and raise more than $1.8 billion at yesterday’s closing price.
U.S. Bancorp fell for the third time in four trading days, declining 3.7 percent to $17.82. The sixth-largest U.S. bank by deposits raised $2.5 billion in a share sale as it plans to repay a $6.6 billion government infusion from the Troubled Asset Relief Program.
Anadarko Petroleum, the oil and natural-gas producer that said it plans to sell 30 million shares, dropped 6.8 percent to $45.53.
‘A Positive’
“The market moving more towards concern about dilution may be a positive in terms of investors’ outlook on the overall economy because they are less concerned with balance-sheet issues and more concerned with earnings issues,” said Joseph Veranth, who oversees $2.2 billion as chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin.
CBS Corp. slid 7.2 percent to $7.07. A rally in the owner of the most-watched U.S. television network may not last because of declining advertising revenue and $6.9 billion in net debt, the Wall Street Journal said in its “Heard on the Street” column.
Nike Inc., the biggest maker of athletic shoes, fell 3.2 percent to $51.46. Stern Agee & Leach Inc. said investors should sell the stock because of increasing inventories and currency fluctuations.
The two-month rally in global equity markets has been based on expectations of a rapid economic recovery that is “extremely unlikely” to materialize, according to Nobel Prize-winning economist Paul Krugman, who spoke at a forum in Shanghai today.
Economy Projections
Economists downgraded their projections for a recovery from the deepest U.S. recession in half a century, now seeing the jobless rate exceeding 8 percent through 2011, a Bloomberg News survey showed.
Unemployment will average 8.5 percent in 2011 after a 9.6 percent rate next year, higher than previously expected, according to the median forecast in the survey taken from May 4 to May 11. The economy may expand 2.8 percent in 2011, less than estimated last month, after a 1.9 percent rise in 2010.
The S&P 500 is little changed in 2009 after tumbling 38 percent last year, its worst annual tumble since the Great Depression.
“We’re in a bottom formation,” said Gregor Mast, an equity strategist at Clariden Leu in Zurich, which oversees about $88 billion. “Economic data and earnings are less bad and sentiment has improved but that’s not enough for a lasting upward trend. We’ll see backlashes.”
To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.
Last Updated: May 12, 2009 15:51 EDT
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So, the jackass that created the housing mess now says its near over?
