Stocks down on global growth concerns

February 23, 2012

Stocks fell worldwide for a second day after reports on the European and Chinese economies spurred concern about growth. US Treasuries rose, and the yen fell to a seven-month low versus the dollar.

The MSCI All-Country World Index of equities retreated 0.4 per cent to 328.98 at 12:47 p.m. New York time. The Standard & Poor's 500 Index decreased 0.4 per cent to 1,356.96 as Dell Inc. tumbled 5.9 per cent after giving a lower-than-estimated sales forecast. Yields on 10-year US Treasuries declined four basis points to 2.02 per cent. The yen weakened to 80.40 per dollar.

European services and manufacturing output shrank in February, according to Markit Economics, while another report showed Chinese manufacturing may shrink a fourth straight month in February. The S&P 500 slumped after rallies in six out of the past seven weeks put it within 0.1 per cent yesterday of 1,363.61, its highest closing level since 2008.

"With this kind of strong move in a short period of time, any negative news might create some selling pressure," Weyman Gong, chief investment strategist at Signature Financial Management Inc., said in a telephone interview from Norfolk, Virginia. His firm oversees $US2 billion. "Some of the earnings numbers, including Dell, were not that great."

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KB Home and Toll Brothers Inc. slumped at least 5.4 per cent in US stock trading. The National Association of Realtors said sales of previously owned houses reached a 4.57 million annual pace in January, missing the median economist projection of 4.66 million in a Bloomberg News survey. The December figure was cut to 4.38 million from 4.61 million.

VIX Futures

Futures traders are pricing in the biggest increase in US equity hedging costs since 2010 after the S&P 500 rose within 2 points of erasing last year's slump. April futures on the Chicago Board Options Exchange Volatility Index settled at 25.15 yesterday, or 6.96 points higher than the level of the gauge. The gap widened to 7.02 points on Feb. 17. The last time two- month futures were that high in relation to the index known as the VIX was July 2010.

Energy companies helped limit the S&P 500's loss today. Nabors Industries Ltd. and Range Resources Corp. rallied more than 2.2 per cent after reporting higher-than-estimated profit. The S&P 500 Energy Index rose 0.2 per cent, the most among 10 industries.

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Crude oil futures fell less than 0.1 per cent to $US105.81 a barrel after rising to $US106.47 earlier, the highest intraday price since May. Gold was little changed at a two-week high in New York, slipping less than 0.1 per cent to $US1,758.10 an ounce.

Fed Purchases

US 10-year notes yields fell from a four-week high as the Treasury is scheduled to auction $US35 billion of five-year debt today in the second of three note offerings totaling $US99 billion. Fitch Ratings lowered Greece's credit rating and said a default is highly likely. The Federal Reserve bought $US1.84 billion of longer-maturity Treasuries today.

The yen fell for a fifth day, the longest streak since April. The pound weakened after Bank of England minutes showed two policy makers voted for a larger increase in asset purchases than the amount finally agreed. The Australian dollar declined after Foreign Minister Kevin Rudd resigned, potentially paving the way for a leadership battle.

BLOOMBERG