U.S. Stocks Drop as Slump in Financials Offsets Economy Data
Sept. 1 (Bloomberg) -- U.S. stocks fell, led by financial shares, as concern the recent rally in equities outpaced the outlook for earnings overshadowed data on manufacturing and pending home sales that topped economists' estimates.
American International Group Inc. tumbled 15 percent and MetLife Inc. declined 4.8 percent after analysts said the insurers' shares have risen too far, too fast. Marshall & Ilsley Corp. and SunTrust Banks Inc. led declines in 23 of 24 companies in the KBW Bank Index.
"The future for the banks is not as muddy as it was two quarters ago, but it's still not clear," said Don Wordell, the Orlando, Florida-based manager of the RidgeWorth Mid-Cap Value Equity Fund that has outperformed 94 percent of rivals in the past five years. "The market can't sustain these huge moves."
The Standard & Poor's 500 Index lost 1.1 percent to 1,009.02 at 11:22 a.m. in New York. The Dow Jones Industrial Average decreased 110.79 points, or 1.2 percent, to 9,385.49.
Benchmark indexes rose earlier after the Institute for Supply Management said factories expanded in August for the first time in 19 months and the National Association of Realtors said contracts to buy pending homes increased more than forecast in July.
U.S. stocks have fallen for three straight days on growing concern the rebound in equities may have gotten ahead of the prospects for a recovery from the first global recession since World War II.
A 52 percent jump in the S&P 500 since March 9 left the equity benchmark valued at about 19 times the profits of its companies as of the end of last week, the most expensive level since June 2004. The 50 percent rally in Europe's Dow Jones Stoxx 600 Index over the same period drove the average price- earnings valuation for its companies to the highest level since 2003.
Bearish Bets
Paul Tudor Jones's Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are among funds betting that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. The firms oversee a combined $15 billion in so-called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
The S&P 500 added 3.4 percent in August for a sixth straight monthly advance, the longest stretch of gains since January 2007, as reports from consumer confidence to home sales signaled an economic recovery. September is historically the worst month for U.S. stocks, with the benchmark index losing 1.3 percent on average since 1928, according to data compiled by Bloomberg.
Valuations for U.S. stocks look "marginally stretched" compared with other developed markets, Credit Suisse said in a research report. Strategist Andrew Garthwaite predicted American equities will underperform when the Institute for Supply Management's manufacturing index is above 50 and rising.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .
Sept. 1 (Bloomberg) -- U.S. stocks fell, led by financial shares, as concern the recent rally in equities outpaced the outlook for earnings overshadowed data on manufacturing and pending home sales that topped economists' estimates.
American International Group Inc. tumbled 15 percent and MetLife Inc. declined 4.8 percent after analysts said the insurers' shares have risen too far, too fast. Marshall & Ilsley Corp. and SunTrust Banks Inc. led declines in 23 of 24 companies in the KBW Bank Index.
"The future for the banks is not as muddy as it was two quarters ago, but it's still not clear," said Don Wordell, the Orlando, Florida-based manager of the RidgeWorth Mid-Cap Value Equity Fund that has outperformed 94 percent of rivals in the past five years. "The market can't sustain these huge moves."
The Standard & Poor's 500 Index lost 1.1 percent to 1,009.02 at 11:22 a.m. in New York. The Dow Jones Industrial Average decreased 110.79 points, or 1.2 percent, to 9,385.49.
Benchmark indexes rose earlier after the Institute for Supply Management said factories expanded in August for the first time in 19 months and the National Association of Realtors said contracts to buy pending homes increased more than forecast in July.
U.S. stocks have fallen for three straight days on growing concern the rebound in equities may have gotten ahead of the prospects for a recovery from the first global recession since World War II.
A 52 percent jump in the S&P 500 since March 9 left the equity benchmark valued at about 19 times the profits of its companies as of the end of last week, the most expensive level since June 2004. The 50 percent rally in Europe's Dow Jones Stoxx 600 Index over the same period drove the average price- earnings valuation for its companies to the highest level since 2003.
Bearish Bets
Paul Tudor Jones's Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are among funds betting that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. The firms oversee a combined $15 billion in so-called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
The S&P 500 added 3.4 percent in August for a sixth straight monthly advance, the longest stretch of gains since January 2007, as reports from consumer confidence to home sales signaled an economic recovery. September is historically the worst month for U.S. stocks, with the benchmark index losing 1.3 percent on average since 1928, according to data compiled by Bloomberg.
Valuations for U.S. stocks look "marginally stretched" compared with other developed markets, Credit Suisse said in a research report. Strategist Andrew Garthwaite predicted American equities will underperform when the Institute for Supply Management's manufacturing index is above 50 and rising.
To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .
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