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U.S. stocks retreated, joining a
global decline in equities, amid concern that Greece may leave
the euro as the region’s leaders meet in Brussels.
Citigroup Inc. and Morgan Stanley (MS) retreated at least 1.6
percent, following losses in European financial companies. Dell
Inc. (DELL), the world’s third-largest personal computer maker, tumbled
14 percent as the company forecast revenue that missed
estimates. Facebook Inc. (FB) rose 2.7 percent after the social
networking site that raised $16 billion in an initial public
offering last week plunged 19 percent over the past two days.
The Standard Poor’s 500 Index slid 0.8 percent to
1,306.50 at 9:49 a.m. New York time. The Dow Jones Industrial
Average fell 98.84 points, or 0.8 percent, to 12,403.97.
“Uncertainty surrounding Greece’s membership in the euro
and possible contagion into other countries plagued by high
deficits just isn’t going away, at least not until Greek
elections have taken place on June 17th,” said Markus Huber,
head of German sales trading at ETX Capital in London.
Concern about Europe’s debt crisis drove the SP 500 down
as much as 8.7 percent from an almost four-year high in April.
European leaders are meeting today to discuss the region’s debt
crisis. The prospect of Greece leaving the euro increased after
parties opposed to the terms of the nation’s second bailout by
the European Union and the International Monetary Fund won most
of the votes in May 6 elections.
Europe’s banks, sitting on $1.19 trillion of debt to Spain,
Portugal, Italy and Ireland, are facing a wave of losses if
Greece abandons the euro. While lenders have increased capital
buffers, written down Greek bonds and used central-bank loans to
help refinance units in southern Europe, they remain vulnerable
to the contagion that might follow a withdrawal, investors say.
‘Pandora’s Box’
“A Greek exit would be a Pandora’s box,” said Jacques- Pascal Porta, who helps manage $570 million at Ofi Gestion
Privee in Paris, including shares in Deutsche Bank AG and BNP
Paribas SA. “It’s a disaster that would leave the door open to
other disasters. The euro’s credibility will be weakened, and it
would set a precedent: Why couldn’t an exit happen for Spain,
for Italy, and even for France?”
Financial companies retreated, following a 2 percent slump
in a measure of European banks. Citigroup (C) fell 2 percent to
$26.37. Morgan Stanley slid 1.6 percent to $13.10.
Dell tumbled 14 percent, the biggest decline on a closing
basis since 2000, to $12.94. The forecast, paired with a first-
quarter sales and earnings miss, pointed to problems endemic to
Dell, Steve Felice, Dell’s president, said in a conference call.
The sales team focused on individual products instead of
packages of hardware and software, he said.
Facebook Rebounds
Facebook added 2.7 percent to $31.85. The shares fell below
its $38 IPO price on May 21. The offering valued Facebook at 107
times trailing 12-month earnings, more than every SP 500 member
except Amazon.com Inc. and Equity Residential. The slump
reinforced concern that the IPO was priced too high.
About 18 million Facebook shares are on loan, an indication
of short-sellers’ interest, according to Data Explorers Ltd. The
amount of stock borrowed equals 4.3 percent of the 421 million
shares that are freely traded, the London- and New York-based
research company said in an e-mail, citing settled trades as of
May 22. The cost to borrow the stock is the most expensive level
on the firm’s scale.
Stock on loan helps measure the presence of short-sellers
in the shares. In a short sale, speculators borrow securities to
sell them on the expectation they can buy them back more cheaply
before returning the loan. The loans represent about 1 percent
of Facebook’s outstanding shares, Data Explorers said. That
compares with 5.3 percent for Zynga Inc. (ZNGA) and 4.1 percent for
LinkedIn Corp. (LNKD), the firm added.
Facebook’s stock on loan may change as more of the shares
become available to borrow in coming days, said Alex Brog,
director of communications at Data Explorers.
Toll Brothers Inc. (TOL) rallied 1.4 percent to $27.41. The
largest U.S. luxury-home builder reported a second-quarter
profit that beat estimates as orders jumped in an improving
housing market.
To contact the reporters on this story:
Rita Nazareth in New York at
rnazareth@bloomberg.net;
Tom Stoukas in Athens at
astoukas@bloomberg.net
To contact the editor responsible for this story:
Nick Baker at
nbaker7@bloomberg.net
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