U.S. Stocks Fluctuate as Boeing Leads Decline in Industrials
By Jeff Kearns

June 23 (Bloomberg) — U.S. stocks fluctuated as Boeing Co. led a drop in industrial companies after delaying its 787 Dreamliner and technology shares slid following a reduced revenue forecast at Rambus Inc., offsetting gains in banks.

Boeing plunged 8.4 percent, the most since 2001 on a closing basis, after the world’s second-largest commercial jet maker postponed its fuel-saving plane for a fifth time. Rambus, a designer of computer-memory chips, slid 13 percent. Goldman Sachs Group Inc. advanced 1.6 percent after FBR Capital Markets Corp. increased its share-price estimate.

“The market is starting to question some of the premises of how strong the U.S. and global economy will be in the second half of the year,” said Nick Sargen, who helps manage $27 billion as chief investment officer at Fort Washington Investment Advisors in Cincinnati. “Stocks are in a holding pattern.”

The Standard & Poor’s 500 Index, which fell the most in two months yesterday, added less than 0.1 percent to 893.48 at 11:40 a.m. in New York after retreating as much as 0.5 percent. The Dow Jones Industrial Average lost 15.72 points, or 0.2 percent, to 8,323.29. Shares in Europe and Asia declined and the MSCI Emerging Markets Index extended its tumble from its 2009 peak to 10 percent.

The S&P 500 yesterday sank 3.1 percent, extending last week’s 2.6 percent decline as the World Bank said the recession will be deeper than previously forecast. A 40 percent rally from March 9 through June 12 left the S&P 500 valued at 14.9 times its companies’ earnings, near the highest since October. The index has since retreated 5.6 percent.

Wealth Destruction

The S&P 500 traded as low as 10.1 times profit on March 9, the cheapest since 1985, after the collapse of New York-based Lehman Brothers Holdings Inc. and the first global recession since World War II sent the benchmark index for U.S. equities to a 17-month, 57 percent decline.

U.S. wealth may take 15 years to rebound, Edmund Phelps, a professor at Columbia University and the winner of the 2006 Nobel Prize for economics, said in a Bloomberg Television interview.

The benchmark index for U.S. stock options climbed the most in nine weeks yesterday. The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 11 percent to close at 31.17 yesterday and advanced to 31.25 today The index measures the cost of using options as insurance against declines in the S&P 500.

Boeing slid 8.5 percent to $42.52. The Chicago-based planemaker said in a statement that the first flight of the 787 Dreamliner, already delayed for two years, will be postponed to reinforce an area within the side-of-body section of the aircraft.

Banks Rebound

Bank of America, the lender that took $45 billion in U.S. aid, increased 0.9 percent to $12.05 after setting a price of $12.7048 for the swap designed to boost capital by more than $2.5 billion.

A measure for financial stocks, which slid 6.2 percent yesterday for the biggest slump among the 10 industry groups, rebounded 0.6 percent today after FBR raised its share forecast on Goldman Sachs Group Inc. Second-quarter results are likely to benefit from “a favorable trading and capital market environment,” analysts wrote, helping send Goldman Sachs shares up 1.6 percent to $139.20.

Rambus tumbled 14 percent to $15.26. The memory-chip designer reduced its second-quarter revenue forecast, citing weak demand for consumer electronics.

Motorola Inc. rose 2 percent to $6.15. The biggest U.S. mobile-phone maker was raised to “buy” from “neutral” at Bank of America, which said “new product news flow could drive” the share price.

Emerging-market shares fell after the World Bank forecast yesterday that the first global recession since World War II will be deeper than it predicted in March.

Stocks and corporate bonds rallied the past three months as lower interest rates and debt purchases by central banks spurred confidence that the world economy would recover from almost $1.5 trillion of writedowns and credit losses at financial companies.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: June 23, 2009 11:41 EDT

taken from bloomberg.com 6-23-09