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U.S. Stocks Erase Gain as House Votes to Limit Card Rates Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Sapna Maheshwari
Nov. 4 (Bloomberg) -- U.S. stocks erased most of a 156- point rally in the Dow Jones Industrial Average after a House bill to curb credit-card rates spurred concern about bank earnings, outweighing the Federal Reserve’s plan to keep interest rates at a record low.
Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. led financial shares to the steepest loss among 10 industries as the vote moved up the start date of many rule changes that will make it more difficult for lenders to raise rates on existing credit cards. The Standard & Poor’s 500 Index wiped out most of a 1.5 percent rally triggered when the Fed said it will leave interest rates at “exceptionally low” levels.
“The credit-card regulation and regulation in general, how much Congress is going to clamp down on financial company activities, is important,” said Giri Cherukuri, who helps manage $1.5 billion at Oakbrook Investments in Lisle, Illinois. “To the extent that Congress keeps their hands off of things, that’s better for financial stocks and financial stock prices.”
The S&P 500 added 0.1 percent to 1,046.5 at 4:19 p.m. in New York. The Dow increased 30.23 points, or 0.3 percent, to 9,802.14. About five stocks fell for every four that rose on the New York Stock Exchange.
The Fed, at the end of a two-day policy meeting, restated its intention to keep interest rates “exceptionally low” for an extended period and said the U.S. economy is picking up.
“Businesses are still cutting back on fixed investment and staffing, though at a slower pace,” the Federal Open Market Committee said in a statement. “Activity in the housing sector has increased over recent months.”
ISM Shows Order Growth
The S&P 500 rallied in morning trading after the Institute for Supply Management’s report on non-manufacturing businesses showed 1.4 percent growth in new orders and a 2 percent increase in the backlog of bookings. The main index in the report fell to 50.6, below analysts’ estimates while still signaling growth.
Some traders may have sold shares in anticipation of the Nov. 6 report on the U.S. job market. The unemployment rate increased to 9.9 percent in October, according to the median economist estimate in a Bloomberg survey.
“It’s such a big number, people would rather wait on stocks,” said Walter Todd, who manages $750 million as co-chief investment officer at Greenwood Capital Associates LLC in Greenwood, South Carolina. “There’s a lot of people taking a wait-and-see approach to Friday’s number.”
Financials Slump
The S&P 500 Financials Index slumped 1.5 percent, the most among 10 industries, after the House vote and as analyst Meredith Whitney said the biggest U.S. banks may face declining values on home-loan bonds with government backing as the Fed prepares to end its $1.25 trillion purchase program.
Bank of America Corp., JPMorgan Chase, Citigroup and Wells Fargo increased holdings of so-called agency mortgage-backed securities by 44 percent from the third quarter of 2008 to the second quarter of 2009, Whitney said in a note yesterday to investors. Those increases came as the Fed began buying securities backed by Fannie Mae, Freddie Mac and Ginnie Mae in an attempt to keep mortgage rates low and spur housing demand, she wrote.
JPMorgan fell 1.2 percent to $42.21, while Wells Fargo slid 3.1 percent to $26.82 and Citigroup lost 1.7 percent to $3.97.
Hartford Financial Services Group Inc. erased earlier gains and fell 5.3 percent to $24.44. The insurer, whose new chief executive officer is conducting a review of businesses, said it will halt sales of some of its life products sold to companies.
Baker Hughes Inc. slipped 5.9 percent to $40.89. The oilfield-services provider that agreed in August to buy BJ Services Co. said third-quarter profit plunged 87 percent after energy prices tumbled.
Health Insurers Gain
Health insurers led the market higher earlier on speculation that opposition to Democrats’ health-care reform will be bolstered by Republican victories in governor races in New Jersey and Virginia. Democratic leaders signaled they’re ready for the House to begin debating the legislation and vote on its passage and yesterday’s elections won’t affect how the House proceeds.
Aetna Inc., the third-largest U.S. health insurer, jumped 5.2 percent to $28.01. Cigna Corp. climbed 5.2 percent to $29.78. A group of health-care equipment and service companies jumped 1.2 percent, after earlier rising as much as 3 percent for its biggest intraday gain since June.
An index of raw-material producers erased earlier gains and fell 0.1 percent. Freeport-McMoRan Copper & Gold Inc. climbed 1.2 percent to $77.70 as gold advanced to a record of $1,096.50 an ounce, while copper led industrial metals higher.
Dollar, Treasuries
The Dollar Index, a six-currency gauge of the greenback’s strength, fell 0.8, erasing yesterday’s gain. The Reuters/Jefferies CRB Index of 19 raw materials climbed for a third straight day, rising 0.2 percent.
Treasuries fell for a third day. The 10-year note yield rose five basis points, or 0.05 percentage point, to 3.52 percent.
Ambac Financial Group Inc. surged 35 percent to $1.50. The world’s second-largest bond insurer reported third-quarter net income of $2.19 billion, reversing a year-earlier loss, after unrealized mark-to-market gains in its credit derivatives portfolio. MBIA Inc., the biggest bond insurer, advanced 7.5 percent to $4.42 for the biggest gain in the S&P 500.
Of the 382 companies in the S&P 500 that have published quarterly earnings since Oct. 7, 84 percent exceeded estimates, according to data compiled by Bloomberg. That would mark the highest full-quarter proportion in data going back to 1993.
Disney, Merck
Walt Disney Co. rallied 1.5 percent to $28.03. The company received Chinese government approval to build a theme park in Shanghai, its first resort investment on the mainland, to tap rising incomes in the fastest-growing major economy.
Merck & Co. jumped the most in the Dow, rising 6.4 percent to $32.64. The drugmaker said that following the acquisition of Schering-Plough Corp., earnings for the combined company, excluding some costs, will increase at a “high single-digit” percentage rate each year through 2013. The company expects cost savings of at lease $3.5 billion annually after 2011 to come from all areas across the company.
Pulte Homes Inc. rose 3.5 percent to $9.55. The U.S. builder that bought competitor Centex Corp. in August boosted its estimated cost savings from the deal by 25 percent and said it reduced debt by $1.7 billion in the third quarter. Lennar Corp. and DR Horton Inc. gained more than 3 percent.
The VIX, a measure of stock-market volatility known as Wall Street’s fear gauge, fell for a third day, dropping 3.8 percent. The index trimmed its retreat after earlier falling as much as 7.6 percent.
To contact the reporters on this story: Sapna Maheshwari in New York at [email protected].
Last Updated: November 4, 2009 16:57 EST |
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