U.S. Stocks Retreat on Payroll Drop; Bear Stearns, Beazer Fall
By Lynn Thomasson
Sept. 7 (Bloomberg) -- U.S. stocks tumbled, wiping out this week's gains, after the first monthly decline in payrolls since 2003 spurred concern the economy is headed into a recession.
Bear Stearns Cos., the fifth-biggest U.S. securities firm, retreated for a third day after Banc of America Securities LLC downgraded the stock on expectations mortgage market losses will reduce earnings. A gauge of homebuilders dropped to the lowest since May 2003 after Beazer Homes USA Inc. said it received default notices from a lender.
Stocks in Europe also fell after the unexpected drop in U.S. payrolls stoked speculation that credit-market losses will lead to a contraction in the world's largest economy. The yield on the two-year U.S. Treasury note sank to a two-year low.
The Standard & Poor's 500 Index lost 23.34, or 1.6 percent, to 1,455.21 as of 10:59 a.m. in New York. The Dow Jones Industrial Average fell 205.99, or 1.5 percent, to 13,157.36. The Nasdaq Composite Index slid 53.63, or 2.1 percent, to 2,560.69.
``It's a headache for stock investors,'' said Keith Wirtz, who helps manage $22 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. ``You've got to worry about whether we're going into a massive slowdown.''
Employers cut 4,000 jobs last month, compared with a revised gain of 68,000 in July that was smaller than previously reported, the Labor Department said. Economists expected an August gain of 100,000, according to a Bloomberg survey. The unemployment rate held at 4.6 percent as almost 600,000 people left the workforce.
Bear Stearns, Beazer
Bear Stearns dropped $3.07, or 2.9 percent, to $104.60. Banc of America analysts cut their rating on the investment bank to ``neutral'' from ``buy'' and expect a 49 percent decline in fixed income trading revenue in the second half of the year.
The stock ``looks like `dead money''' for the next six to 12 months, analyst Michael Hecht wrote in a note.
Beazer lost 93 cents to $9.98. The Atlanta-based homebuilder said the notices are without merit and it does not believe it's in default. The notices from U.S. Bank National Association cover Beazer notes due from 2011 to 2016. U.S. Bank is a trustee of the company's bondholders. A measure of homebuilders in S&P indexes lost 3.6 percent as all 16 members retreated.
Traders boosted bets the Fed will lower its 5.25 percent benchmark lending rate by half a percentage point at its September meeting. Fed funds futures showed a 76 percent chance of a 0.5 percentage point rate cut, compared with a 42 percent chance yesterday.
`Not the Kind of Number I'd Like to See'
Treasury Secretary Henry Paulson said the decline in payrolls was ``not totally surprising'' and expressed confidence that the economy will still expand in the second half of the year.
``It's not the kind of number I'd like to see,'' Paulson said in an interview with Bloomberg Television in Washington. ``Data does not always move in a straight line, so occasionally you will find some surprises.''
Four regional Federal Reserve bank presidents yesterday declined to endorse a cut in the benchmark rate this month as policy makers gauged the impact of credit market losses.
Kansas City Fed President Thomas Hoenig and Dennis Lockhart of the Atlanta Fed said they haven't seen sure signs of a housing spillover into the economy. St. Louis Fed President William Poole and the Dallas Fed's Richard Fisher said the effects of the turmoil are unclear. Hoenig and Poole are voters on the Federal Open Market Committee. Fisher and Lockhart aren't.
'Final Catalyst'
``You're going to see the rate-cut crowd jumping in saying this is what the Fed needs to see as the final catalyst,'' said Mike Capitani, head of equity trading at Caris & Co. in New York.
All 10 industry groups in the S&P 500 declined.
Wyeth fell $1.62 to $45.92. Teva Pharmaceutical Industries Ltd., the world's biggest generic drug maker, can sell a low- cost version of Wyeth's heartburn pill Protonix in the U.S., a federal judge ruled. Wyeth was cut to ``hold'' from ``buy'' at Citi Investment Research.
Harley-Davidson Inc. retreated the most since April 2005, dropping $4.55, or 8.4 percent, to $49.54. The largest U.S. motorcycle maker slashed its profit forecast for the second time this year after U.S. sales dropped last month. Next year ``will continue to be challenging'' because of a sluggish U.S. economy, the company said.
Office Depot Inc. declined $1.71, or 7.8 percent, to $20.23. The world's second-largest office-supplies chain said yesterday it scaled back plans for store openings for the second time this year. Profit will decline in the third and fourth quarters, the company said.
Morgan Stanley
Morgan Stanley dropped $1.21 to $61.29. A quantitative investment unit at the world's second-biggest securities firm lost about $500 million between the last week of July and Aug. 9, the Wall Street Journal reported, citing traders. The group is not certain what caused the so-called quant, which uses mathematical models to indicate prices to buy and sell securities, to plunge, the newspaper said.
Neither Morgan Stanley nor Peter Muller, who runs the fund, would comment on the losses, the newspaper said.
Deutsche Bank AG fell $2.99 to $123.50. Profit at Deutsche Bank, Credit Suisse Group and UBS AG may miss analyst estimates, Dresdner Kleinwort said in a note to clients. Forecasts are between 10 percent and 20 percent too high, Stefan-Michael Stalmann wrote.
Credit Suisse American depositary receipts, each representing one share, lost $1.78 to $64.22. UBS slipped 98 cents to $51.51.
In Europe, the Dow Jones Stoxx 600 Index decreased 2.1 percent, bringing its decline this week to 2.7 percent.
In other economic reports, the Commerce Department said inventories at U.S. wholesalers rose less than forecast in July and sales cooled, signaling production may slow. Stockpiles increased 0.2 percent, the smallest rise this year and half what economists in a survey had estimated. Sales climbed 0.1 percent, the least since January.
