U.S. Stocks Join Global Retreat as Dell Slumps, Dollar Advances

Nov. 20 (Bloomberg) -- U.S. stocks fell, joining a global retreat, as earnings at Dell Inc. and D.R. Horton Inc. trailed analysts’ estimates and concern grew that European Central Bank policy makers will phase out economic stimulus measures. The dollar rose and two-year Treasury note yields fell to the lowest level of the year as investors sought safer assets.

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,091.38 at 4:03 p.m. in New York as Dell tumbled the most this year to lead declines in technology shares. Europe’s Dow Jones Stoxx 600 Index and the MSCI Asia-Pacific Index dropped for the fourth straight day, the longest streaks in four months. Crude oil declined as the Dollar Index gained as much as 0.8 percent.

“We live in a world where on a day-to-day basis all risk assets move in the same direction, and it’s the opposite direction from the dollar,” said John Kattar, who oversees $1.6 billion as chief investment officer at Eastern Investment Advisors in Boston. “There is a lot of good news built into stock prices, and stocks are more or less fairly valued given the fundamentals.”

U.S. equities fell for a third straight day, with the S&P 500 dropping 0.2 percent over the past five days to cap its first weekly decline since October. The Dow Jones Industrial Average lost 14.28 points, or 0.1 percent, to 10,318.16 and rose 0.5 percent in the week. Declines were limited today as Pfizer Inc. and Merck & Co. led gains in drugmakers while J.M. Smucker Co. paced an advance in consumer staples companies.

Less than 7 billion shares changed hands on U.S. exchanges, the fourth-slowest trading session of the year.

Rebound Stalls

The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high on Nov. 17. The deepest U.S. economic contraction in seven decades ended in the third quarter, when government incentives spurred spending on homes and cars. Corporate profits, which have shrunk for a record nine straight quarters, are projected to rise in the current period, according to analyst estimates compiled by Bloomberg.

Dell, the third-largest maker of personal computers, slid 10 percent to $14.29 after reporting profit decreased by more than half. Technology shares in the S&P 500, the largest among 10 industries, lost 0.6 percent as a group and contributed the most to the retreat.

“In an economy that’s growing slowly, we’re finding some companies that are continuing to execute well and some that are faltering,” said Alan Gayle, senior investment strategist at Ridgeworth Capital Management in Richmond, Virginia. “The market wants to see companies that can deliver on their business model, and it’s pretty clear Dell’s business model isn’t as effective as it has been in years past.” Ridgeworth manages $60 billion.

Builders Slump

D.R. Horton Inc. tumbled 15 percent to $10.37 for the steepest loss in the S&P 500. The second-largest U.S. homebuilder by revenue reported a fourth-quarter loss of 73 cents per share, three times wider than the average estimate of analysts surveyed by Bloomberg. All but one of 12 companies in an index of homebuilders retreated, with Pulte Homes Inc., Lennar Corp. and KB Home each slumping at least 3.4 percent.

J. M. Smucker added 5.4 percent to $56.35. Second-quarter earnings excluding some items were $1.22 a share, 18 percent higher than the average analyst estimate, as sales of Folgers coffee helped boost revenue by 52 percent.

Earnings Season

Per-share earnings topped the average analyst estimate at 80 percent of S&P 500 companies that have released third-quarter results, the biggest share for a full quarter in Bloomberg data going back to 1993. Still, combined profits are down 14 percent from the year-earlier period.

Dillard’s Inc. added 9.7 percent after the department-store chain was raised to “buy” from “hold” and its share price estimate increased to $28 from $13.50 at Deutsche Bank AG, which said the company is positioned better than almost all investors estimate to increase earnings based on merchandising and cost control initiatives.

MetroPCS Communications Inc. climbed 6.5 percent to $6.52 for the biggest gain in the S&P 500 on speculation it may be acquired. Robert Dezego, an analyst at SunTrust Robinson Humphrey Inc. in Atlanta, said MetroPCS is the focus of renewed speculation about mergers in the global telecommunications industry.

Trichet’s Liquidity Concern

European stocks slipped as ECB President Jean-Claude Trichet said the central bank will remove liquidity in order to ensure the bank doesn’t fuel inflation.

“Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said at a conference in Frankfurt today. “Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally.”

Trichet has already signaled the ECB is unlikely to renew its offer of 12-month loans to banks after the third installment in December. Council member Guy Quaden indicated this week that the bank may offer fewer three-month and six-month loans next year. At the same time, policy makers have stressed the exit from emergency lending measures doesn’t necessarily imply they will raise interest rates soon.

“Stocks all over the world and all risk asset classes are being driven by this liquidity factor,” which also is reflected in U.S. dollar weakness, Eastern Investment Advisors’ Kattar said.

The Dollar Index, which gauges the dollar against a basket of six major currencies, rose 0.4 percent to 75.607 and climbed as high as 75.879. It rose three out of the last four days after touching a 15-month low on Nov. 16. The U.S. currency gained against all 16 major currencies except the yen. The yen rose against all 16.

Europe, Asia

Europe’s Dow Jones Stoxx 600 Index lost 0.8 percent, led by real-estate and financial shares. Asian shares declined after Sony Corp. said it will take longer to reach its profitability targets. Sony slid 2.4 percent in Tokyo.

Additional strength in the dollar “is the primary near- term risk to equities,” Myles Zyblock, a strategist at RBC Capital Markets in Toronto, wrote in a report today.

Energy companies in the S&P 500 fell 0.9 percent as a group, the biggest decline among the benchmark’s 10 industry groups, as the dollar’s rebound spurred drop in the price of crude oil.

Merck and Pfizer led health-care companies to a 0.6 percent gain, the biggest in the S&P 500.

“Some of the good value, high-quality companies that got left behind over the last year are increasingly getting interest” from investors, said Michael Shinnick, a South Bend, Indiana-based money manager at Wasatch Advisors Inc. Merck is among the holdings of the Wasatch-1st Source Income Equity Fund he helps manage.

The two-year Treasury note yield touched 0.67 percent, the lowest since December, and fell nine basis points this week. Treasury three-month bill rates turned negative yesterday for the first time since December as investors were willing to pay for the safety of the shortest-dated U.S. government assets.