Wells Fargo & Co. (WFC) and Citigroup Inc. (C) each dropped 1.2 percent, following a tumble in European lenders. Travelers Cos., the only insurer in the Dow Jones Industrial Average, slid 3 percent as profit fell. Verizon (VZ) Communications Inc., the second- largest U.S. phone company, lost 1.8 percent after reporting a loss. Peabody Energy Corp. (BTU), the biggest U.S. coal producer, sank 3.4 percent as earnings missed estimates.
The S&P 500 fell 0.2 percent to 1,313.12 at 1:03 p.m. New York time, after dropping as much as 0.8 percent earlier. The index rose 2.1 percent over the previous five days. The Dow lost 42 points, or 0.3 percent, to 12,666.82 today.
“It’s all about the negotiations of Greek debt,” Mike Ryan, the New York-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview. His firm oversees $715 billion. “There’s concern that, if it spills over, it undermines some of the progress being made. I’m still not convinced that they solved all of their problems. The next question of course is how deep of an impact that will have on corporate earnings and how the markets price that in.”
Global stocks slumped as European finance ministers pushed bondholders to provide greater debt relief for Greece, spurring concern the nation may fail to make a March 20 bond payment. The International Monetary Fund cut its forecast for the global economy. President Barack Obama tonight will lay out what he calls a “blueprint” for revitalizing the economy in his third State of the Union address before a joint session of Congress.
Beating Projections
The S&P 500 yesterday capped its longest rally since December as data bolstered confidence in the economy and most quarterly reports exceeded forecasts. Of the 74 companies in the S&P 500 that reported results since Jan. 9, 48 posted per-share earnings that beat projections, Bloomberg data show.
Financial stocks slumped. The KBW Bank Index (BKX) of 24 stocks slid 0.7 percent. Wells Fargo dropped 1.2 percent to $30.56. Citigroup declined 1.2 percent to $29.48.
Travelers slid 3 percent to $58.47. The insurer said fourth-quarter profit fell on lower investment income and a smaller reserve benefit, capping the company’s least profitable year since 2004. Travelers, led by Chairman and Chief Executive Officer Jay Fishman, has increased rates for customers as near record-low interest rates eroded investment income from the company’s bond portfolio and losses from storms led the insurer to assess whether its models understated risk in the U.S.
iPhone Sales
Verizon declined 1.8 percent to $37.71. The phone company reported a fourth-quarter loss after booking a pension charge and having higher subsidy costs for rising iPhone sales.
Peabody retreated 3.4 percent to $36.25. First-quarter coal volumes will be affected by plans to extend operations at the Twentymile Mine in Colorado. Geological problems reduced output at the North Goonyella mine in Australia in the fourth quarter. A roof collapse at North Goonyella halted output there in August.
Coach (COH) Inc. jumped 6.6 percent to $68.46. The largest U.S. luxury handbag maker reported a 15 percent increase in quarterly profit that topped analysts’ estimates, driven by holiday sales in North America.
Waters Corp. (WAT) soared 8.4 percent, the most in the S&P 500, to $85.34. The maker of laboratory products and instruments posted quarterly profit and sales that beat analysts’ estimates.
Earnings Estimates
Earnings probably grew 3.4 percent for S&P 500 companies in the fourth quarter, according to a Bloomberg survey of analysts. The projection is down from 4.6 percent last week and 6.2 percent at the end of last year. The global economy is forecast to grow 2.3 percent in 2012, according to the median projection in a survey of economists, down from the estimate of 3.4 percent in July.
“The market is not terribly disappointed by what appear to be soft earnings compared to where we’ve been,” David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc., said in a telephone interview. His firm oversees $600 billion. “There’s a creeping sense of optimism that things are going to improve. That lessens the fear that along with softness in Europe we’ll have a global recession.”
Collective Brands Inc. (PSS) rallied 4.8 percent to $15.65. The company may extract the biggest takeover premium of any apparel retailer in the world as the maker of Saucony and Sperry Top- Sider shoes lures private equity buyers.
Buyout Firms
Collective Brands, which said in August it was reviewing options to boost shareholder value, may attract interest from buyout firms and rivals such as Wolverine World Wide Inc. (WWW) when bids are due next week, according to people familiar with the process. The company, which also owns the Payless ShoeSource chain, could be worth as much as $27 a share based on the value of its separate businesses, Morningstar Inc. said.
While the 87 percent premium would be the largest of any deal in the industry worth at least $100 million, it still allows acquirers to get Collective Brands at half the price of its competitors relative to sales, according to data compiled by Bloomberg. In a breakup, an apparel company could keep the wholesale brands, which boosted sales by 25 percent in the first nine months of 2011, while a private equity firm would run the Payless chain for its cash flow, Auriga USA LLC said.
“On the retail side of the business, this seems like almost a perfect set-up for a private equity company,” R.J. Hottovy, director of consumer research at Chicago-based Morningstar, said in a telephone interview. “The wholesale brands alone would be an attractive acquisition target for any of the major branded footwear players.” For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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