U.S. Stocks Decline as Violence in Libya Outweighs Optimism on Economy

U.S. Stocks Decline as Violence in Libya Outweighs Optimism on Economy 
U.S. stocks fell, sending the Standard & Poor’s 500 Index lower a third time in four days, as violence in Libya tempered optimism that the biggest equity rally since 1955 will extend into a third year.

Caterpillar Inc. (CAT) and DuPont Co. fell at least 1 percent, pacing losses in industrial shares. Texas Instruments Inc. (TXN) slumped 3.1 percent as the largest analog chipmaker narrowed its profit estimate. Finisar Corp. (FNSR) tumbled 39 percent, leading other network-equipment makers lower, as its profit forecast missed analyst estimates. International Business Machines Corp. (IBM) rose 2.2 percent as Deutsche Bank AG lifted its share-price estimate for the largest computer-services provider.

The S&P 500 dropped 0.1 percent to 1,320.02 at 4 p.m. in New York. The Dow Jones Industrial Average fell 1.29 points, or less than 0.1 percent, to 12,213.09 as IBM, which makes up about 10 percent of the Dow, propped up the 30-stock gauge. Oil fell 0.6 percent to settle at $104.38 a barrel as a surge in supplies at a U.S. hub overshadowed concern about violence in Libya.

“You’d be crazy not to be concerned about geopolitical risks,” said Philip Dow, director of equity strategy at Minneapolis-based RBC Wealth Management, which oversees $164 billion. “Oil touches everything. However, if you’ve paid attention to every near-term uncertainty of the last two years, you would have missed the big move in stocks. You can’t see the forest for the trees. There’s not enough evidence that this could derail the global recovery. This is an expansion.”

Middle East Unrest

The S&P 500 has fallen 1.7 percent from this year’s highest level on Feb. 18 as oil surged amid unrest in Libya and the Middle East. The benchmark for U.S. equities has rallied 95 percent from its bear-market low exactly two years ago amid government stimulus measures and as corporate earnings beat analysts’ estimates for eight straight quarters.

Libya’s Ras Lanuf refinery, the country’s largest crude- processing plant, was shut amid fighting between government forces and rebels, an official with the Libyan Emirates Oil Refining Co. said. Oil tanks at the nearby Es Sider terminal were damaged by bombings today, according to Al Jazeera television.

While some use “these issues to paint a gloomy picture, we remain optimistic and believe this ‘wall of worry’ will help elongate the bull run,” said Kully Samra, who manages U.K.- based clients for Charles Schwab Corp., which has $1.5 trillion in client assets. “The general trend in stocks continues to be higher despite increasing concerns over inflation, debt, global conflict, rising interest rates and oil prices.”

$28 Trillion Restored

Laszlo Birinyi, who told clients to buy as the S&P 500 fell to a 12-year low of 676.53 on March 9, 2009, says gains that added about $28 trillion to global share values will outlast previous increases as investors who missed the first phase play catch-up. Valuations are still below historical averages, said Barton Biggs, the hedge-fund manager who purchased stocks before the S&P 500 almost doubled.

“These kinds of strong beginnings lead to long and durable bull markets,” Birinyi, who founded Westport, Connecticut-based research and money management firm Birinyi Associates Inc. in 1989 after a decade on the trading desk at Salomon Brothers, said in a March 7 phone interview. “While there will be corrections and while there will be pauses, we’re still of the view that this is a bull market that we expect to go on for several years.”


Five straight quarters of U.S. profit growth and the biggest yearly increase since 1988 have held down valuations, data compiled by Bloomberg show. The U.S. benchmark index is trading at 15.5 times reported earnings, compared with the average ratio of 19.7 at bull-market peaks.

The proportion of investment publications that are forecasting a correction, or 10 percent decline in the market, fell to a four-month low of 26.7 percent between March 2 and yesterday, according to Investors Intelligence, which has examined forecasts in newsletters since 1963. Newsletter writers who are bullish rose to 52.2 percent, the highest since Jan 11, while bearish publications climbed to 21.1 percent, the highest in a month.

Stocks of industries which are most dependent on economic growth, including commodity producers, technology and industrial companies, led the declines in the S&P 500.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Adam Haigh in London at ahaigh1@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net