•Stocks in U.S. Fall as Consumers Hoard Cash, World Bank Sees Deeper Slump

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U.S. Stocks Slump, Posting First Back-to-Back Loss Since March
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By Lynn Thomasson and Rita Nazareth

June 27 (Bloomberg) -- U.S. stocks fell, pushing the Standard & Poor’s 500 Index to the first back-to-back weekly declines since March, after the World Bank said the recession will be deeper than previously forecast and the highest savings rate in 15 years signaled consumers may pare spending.

Boeing Co. tumbled 14 percent after delaying its target for the first flight of the 787 Dreamliner. Nike Inc., the world’s largest athletic-shoe maker, lost 10 percent after saying orders declined 12 percent because of the global economic slump. ConocoPhillips and Apache Corp. sank more than 3.1 percent on oil’s slump below $70 a barrel.

The S&P 500 declined 0.3 percent to 918.90 this week. The Dow Jones Industrial Average fell 101.34 points, or 1.2 percent, to 8,438.39. The Nasdaq Composite Index added 0.6 percent to 1,838.22.

“The question that has emerged is: Has the market gotten ahead of the economy?” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “The consumer is hoarding cash and that’s an economic headwind.”

While the S&P 500 is up 36 percent since reaching a 12-year low on March 9, the index has slipped 2.9 percent in the past two weeks as investors speculated that share prices already reflect a recovery in the economy and profits. Energy producers, makers of industrial equipment and real-estate companies have fallen the most in the S&P 500 since June 12, with each group losing more than 7.7 percent, as oil prices decreased and U.S. new home sales unexpectedly fell in May.

Largest Currency Reserves

The dollar dropped, pushing a gauge of its performance against currencies from six trading partners to a two-week low. China’s central bank reiterated a call for a worldwide currency, adding to speculation that the country will diversify its cash reserves, the world’s largest at more than $1.95 trillion.

Boeing, the world’s second-largest commercial planemaker, slid 14 percent to $41.88 this week. The 787 Dreamliner, already two years behind schedule, will miss its June 30 first-flight target and a new delivery timetable won’t be available for weeks, Boeing said.

Nike dropped 10 percent to $50.84. Excluding the effect of currency exchange rates, worldwide orders for delivery from June through November fell 5 percent from a year earlier. Sara Hasan, an analyst with McAdams Wright Ragen Inc. in Seattle, projected orders would decline 2 percent, at most, on that basis.

$69.16 a Barrel

ConocoPhillips, the second-largest U.S. oil refiner, retreated 3.1 percent to $41.62. Apache, the second-biggest independent U.S. oil producer, slumped 4.1 percent to $72.22.

Oil, which closed as high as $72.68 on June 11, has fallen to $69.16 in New York on concern the economy may weaken.

“It was unrealistic to expect” stocks to keep rising, said Hank Smith, who helps oversee $5.5 billion as chief investment officer of Haverford Trust Co. in Radnor, Pennsylvania. “We’re still in a bottoming phase of the economy and getting mixed reports.”

The S&P 500 plunged 3.1 percent, the most in two months, on June 22 after the World Bank said unemployment and poverty will rise in developing nations and predicted a 2.9 percent contraction in the global economy this year. That compares with a prior estimate of a 1.7 percent decline. Growth is expected to return in 2010 at 2 percent, less than the 2.3 percent forecast about three months ago.

Highest Savings Rate

Equities retreated yesterday as the Commerce Department said the savings rate among Americans reached 6.9 percent in May, the highest since December 1993, spurring concern that consumer spending will wane.

“The magnitude of that savings rate may have gotten some folks by surprise,” said Philip Orlando, who helps manage $409 billion as chief equity market strategist at Federated Investors Inc. in New York. Economic and earnings growth is “potentially not going to be as robust as some were thinking. That’s weighing on stocks.”

The U.S. economy shrank at a 5.5 percent annual rate in the first quarter, capping the worst six-month performance in half a century, according to a Commerce Department report. The number of Americans filing claims for unemployment benefits unexpectedly rose last week, a reminder that companies will keep cutting staff even as the economy stabilizes.

Lennar Corp. surged 18 percent to $9.18 for the S&P 500’s biggest gain. The third-largest U.S. homebuilder bolstered its cash and reported 52 percent more second-quarter revenue than analysts’ estimated, according to Bloomberg data.

General Mills Inc., Constellation Brands Inc., Apollo Group Inc. and H&R Block Inc. are among companies scheduled to report earnings next week. Economic reports may show the U.S. unemployment rate rose to 9.6 percent, the highest since 1983, and factory orders increased for a second month in May with a 0.8 percent gain, according to the median economist estimates compiled by Bloomberg.

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.
Last Updated: June 27, 2009 08:00 EDT

 

Hi blsh carrying on from one of our pm's i got some silver too. after this post i think i did the right thing. i only have 20 oz but it could get me lunch for a while if the shtf. someone suggested i get index linked gilts what do you think?

 

I really don't know.

It's tough to know what to do when everything around you is manipulated, and you have no control over the intentions and desires of the most powerful people and organizations in the world, who will get their way.

If they want or need the USD to rise, they will make it so. If they want precious metals to deflate, it will happen. Stock market crash or bubble? Done, so long as it suits their needs.

How can anyone make anything but a gambling move in an era like this?