U.S. Stocks Decline as Technology Slump Offsets Housing Rebound

By Elizabeth Stanton
Sept. 29 (Bloomberg) -- U.S. stocks declined as technology shares retreated from a one-year high and energy producers dropped as a stronger dollar dragged down oil, overshadowing the biggest gain in home prices in four years.
Cisco Systems Inc. and Intel Corp. fell more than 1.3 percent, leading computer companies lower. Exxon Mobil Corp.
lost 0.3 percent as the dollar strengthened to a two-week high against the euro, sending crude to a 0.3 percent decline. KB Home led homebuilders higher after the Standard & Poor’s/Case- Shiller home-price index rose 1.2 percent in July from June.
The S&P 500 Index fell 0.2 percent to 1,060.61 at 4 p.m. in New York after rising 0.6 percent. The Dow Jones Industrial Average decreased 47.16 points, or 0.5 percent, to 9,742.20.
"We’ve had a good rally," said Randy Bateman, who oversees $13 billion as chief investment officer at Huntington Asset Advisors in Columbus, Ohio. "Some people are going to say valuations have recovered sufficiently given the uncertainties and pull money off the table."
The S&P 500 has rallied 57 percent from a 12-year low in March, pushing valuations in the index to 20 times reported operating profits from the past year, data compiled by Bloomberg show. That’s near most expensive level since 2004. Alcoa Inc.
will be the first company in the Dow average to release third- quarter earnings, scheduled for Oct. 7.
Technology shares in the S&P 500 fell 0.7 percent after closing yesterday at the highest level since September 2008. The group is still the best-performing industry in 2009, having surged 45 percent.

Cisco, Intel Slump

Cisco, the biggest maker of networking equipment, lost 1.3 percent to $23.30. Intel, the largest producer of semiconductors, retreated 1.3 percent to $19.48.
The S&P 500 Energy Index slumped 0.6 percent as the U.S.
currency gained. Exxon, the biggest U.S. oil producer, lost 0.8 percent to $69.07.
The dollar advanced to a two-week high versus the euro after an unexpected drop in U.S. consumer confidence this month discouraged demand for higher-yielding assets funded by borrowing in the greenback. The dollar climbed 0.4 percent to
$1.4571 per euro, from $1.4622 yesterday, and touched $1.4527.
MBIA Inc. fell 4.7 percent to $7.83 after S&P cut the credit ratings of the world’s biggest bond insurer by total guarantees. The company had its rating lowered to BB-, or three steps below investment grade, from BB by S&P, which cited continued losses related to structured finance products.

Paying Up

"Investors are aggressively looking for those companies that are doing well on an operational basis, and are willing to pay up for that," said Mark Freeman, a money manager at Westwood Management Corp. in Dallas, which oversees $9 billion. "We may be out of a recession, but we’re still in a difficult environment. Not every company is going to be able to operate and do well in a slow-growth environment."
KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, added 1.6 percent to $17.17. Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending, according to S&P/Case-Shiller.
"We’re seeing the bottom in the housing market," said Robert Lutts, president of Cabot Money Management in Boston, which manages $450 million. "What the stock market is gauging here is the health of the consumer. Every time you see a tick up in home values, it puts a floor under the economy, which the market is going to love."

Walgreen, Gannett Advance

Walgreen Co. jumped 9.2 percent to $37.35, the highest price since April 2008. The second-largest U.S. drugstore chain reported 13 percent more fourth-quarter per-share profit than analysts estimated after boosting prescription-drug sales.
Gannett Co. surged 18 percent, the most in the S&P 500, to $11.74. The largest U.S. newspaper publisher forecast third- quarter profit that exceeded analysts’ forecasts and announced a plan to offer $400 million of senior notes.
Moody’s Corp. advanced 11 percent to $20.81. McGraw-Hill Cos. rallied 7.3 percent to $26.11. Piper Jaffray Cos. said a rebound in debt sales will bolster earnings for the credit- rating companies.
The steepest rally in the S&P 500 since the 1930s is restoring Byron Wien’s reputation as a stock picker. Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33 percent annual gain in the benchmark index, implying a 13 percent advance from today’s close. More than six months ago, the S&P 500 needed to rise 77 percent to reach Wien’s year-end prediction of 1,200.
Wien’s year-end forecast for the S&P 500 is higher than the average estimate of strategists surveyed by Bloomberg of 1,037.
U.S. equities are in a bull market and profits will increase as the economy rebounds, bringing down price-to- earnings ratios, Laszlo Birinyi said.
"The bull market is intact," Birinyi, the founder of Westport, Connecticut-based research and money-management firm Birinyi Associates Inc., said today in a Bloomberg Television interview. "The market is saying that the ‘E’ part of P/E may be a pleasant surprise. The market is forecasting that you’re going to have a better recovery than people think."