Monday 27 March 2017

US stocks retreat after personal-income data trail forecasts

US stocks fell, extending declines from three weeks of losses for benchmark indexes, after slower-than-forecast growth in personal incomes added to concern the economic rebound is slowing.

Walt Disney, Berkshire Hathaway and Chevron Corp. dropped at least 0.4pc to lead declines in the largest US companies.

Intel slipped 0.8pc after agreeing to buy Infineon Technologies, AG’s wireless unit, for about $1.4bn (€1.1bn). Genzyme advanced 3.8pc after France’s Sanofi-Aventis SA made an $18.5bn (€14.6bn) cash offer for the US biotechnology company.

The Standard & Poor’s 500 Index slipped 0.3pc to 1,061.72 as of 9:33am in New York. The Dow Jones Industrial Average fell 25.47 points, or 0.3pc, to 10,125.18.

“We will continue to struggle with: Is the pace continuing to slow further or is that pace continuing to pick up?” said Timothy Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York, which manages $2bn (€1.6bn).

“Bigger news we’re seeing today is continued acceleration in M&A. It’s not reacting positively to it in the overall market, which is somewhat surprising. There is this overhang about macroeconomic issues.”

Index futures fluctuated earlier before heading decisively lower after government data showed personal incomes climbed 0.2pc in July, less than projected, and the savings rate dropped. Personal spending rose 0.4pc, the most since March, after little change the prior month, Commerce Department figures showed.

S&P 500’s weekly drop

US stocks rose on August 27 as Federal Reserve Chairman Ben S. Bernanke vowed to safeguard the economy and growth in gross domestic product slowed less than estimated.

The S&P 500 still dropped 0.7pc last week as disappointing home sales bolstered concern the recovery is at risk. The gauge was 13pc lower than its 2010 peak on April 23 as of August 27.

“We don’t see much reason for consumers in the present environment -- with little loan growth, still-high unemployment, uncertainty about pensions going forward -- to really start consuming more,” Adrian van Tiggelen, chief strategist at ING Investment Management in The Hague, told Mark Barton on Bloomberg Television’s 'Countdown'.

“We are neutrally invested in equities, we think markets are fairly priced right now.”

Economy

Investors will also get reports on manufacturing and payrolls later in the week to assess whether the economic rebound is faltering.

Speaking at the Fed’s annual conference in Jackson Hole, Wyoming on August 27, Bernanke said the central bank has the tools to prevent the US economy from slipping back into a recession, while stopping short of indicating an immediate need for more stimulus.

Analysts are turning more pessimistic even as they push up estimates for profit growth among S&P 500 companies to 36pc, the highest since 1988. For the first time since at least 1997, fewer than 29pc of ratings for stocks covered by brokerages worldwide are “buys,” according to 159,919 recommendations compiled by Bloomberg.

Genzyme jumped 3.8pc to $70.18 after Sanofi offered to buy the company for $69 a share in cash, taking its bid public after the US company refused to negotiate. Genzyme shares have gained 38pc in New York trading this year.

Intel slipped 0.8pc to $18.23. The world’s largest chipmaker agreed to buy Infineon’s wireless unit, gaining a foothold in the mobile-phone business it has struggled to crack for more than a decade.

The all-cash transaction is expected to close in the first quarter of 2011, Infineon, Europe’s second-largest semiconductor maker, said today.

Bloomberg

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