Financial Headlines                                                    

U.S. Stocks Tumble on Dollar's Slide; Wal-Mart's Sales & Ford 's Stock Decline:

By Michael Tsang and Nick Baker

Nov. 27, 2006  

(Bloomberg)
--
U.S. stocks dropped the most in five months after a falling dollar and a sales slump at Wal-Mart Stores Inc. heightened concern that an economic slowdown will curb holiday spending.

Shares of retailers sank after Wal-Mart, the world's biggest discount chain, said monthly sales declined for the first time in 10 years. Nokia Oyj, the largest mobile-phone maker, retreated as a lower U.S. currency threatened the value of dollar-denominated sales.

Higher oil prices also hurt stocks by suggesting energy costs will leave consumers with less to spend on year-end gifts. Crude rose above $60 a barrel in New York. `

`The markets are reacting to near-term concern on the dollar and any signs of consumer weakness, and Wal-Mart might be an example of that,'' said Keith Wirtz, who helps oversee $21 billion as chief investment officer at Fifth Third Asset Management in Cincinnati.

The Standard & Poor's 500 Index lost 19.05, or 1.4 percent, to 1381.90. The Nasdaq Composite Index dropped 54.34, or 2.2 percent, to 2405.92. Both indexes had their biggest declines since June 5.

The Dow Jones Industrial Average slid 158.46, or 1.3 percent, to 12,121.71, its steepest fall since July 13. A 2.7 percent retreat in Boeing Co., the world's second-largest maker of commercial aircraft, and a 2 percent fall in International Business Machines Corp., the biggest computer services company, weighed on the 30-stock average.

Profit Growth

Before today's retreat, the S&P 500 had risen 14 percent from this year's low, set in mid-June. Falling prices for crude oil, along with a streak of quarterly earnings growth above 10 percent that matched the longest since 1950, aided the advance.

"We've had a tremendous move in the market and very little pullback,'' said Chuck Carlson, who oversees $110 million at Horizon Investment Services LLC in Hammond, Indiana. ``The market's probably due for one.''

Earnings for companies in the S&P 500 will increase by an average of 9.6 percent this quarter, after climbing 19 percent in the third quarter, according to a survey of analysts by Thomson Financial.

The U.S. Dollar Index, which gauges the dollar's value against a currency basket including the euro, yen, Swiss franc, British pound, Canadian dollar and Swedish krona, declined to 83.25, the lowest since March 2005. The euro also advanced to the highest since March 2005 against the U.S. currency.

'Going Against You'

"Anything that suggests that economic growth is getting even slower isn't going to be good for stocks,'' said Wayne Reisner, who oversees $1.6 billion at Carret Asset Management in New York. For overseas investors, "it's not a good thing to be making investments in a currency that's going against you.''

For investors whose portfolios are denominated in euros, the S&P 500 is down about 0.2 percent this year, compared with an 11 percent gain in dollars.

Nearly 10 stocks fell for every one that rose on the New York Stock Exchange, the broadest sell-off in more than 14 months. Volume on the Big Board totaled 1.62 billion shares, 4.5 percent more than the three-month daily average.

Wal-Mart slipped $1.29, or 2.7 percent, to $46.61. The company on Nov. 25 said November sales at U.S. stores open at least a year fell 0.1 percent, lower than Wal-Mart's forecast of unchanged sales. The merchant marked down toys, electronics, appliances and groceries, while cutting prices on generic drugs.

"The consumer is being more careful,'' said Caryn Zweig, who helps manage about $700 million at Abner, Herrman & Brock Inc. in Jersey City, New Jersey. 

'A Long Shadow'

The slowdown at Wal-Mart may "cast a long shadow over earnings,'' Merrill Lynch & Co. wrote in a note to clients.

Other discount retailers declined on concern cost cuts to lure customers will erode profits in the fourth quarter, when merchants generate a third of their annual profit.

Big Lots Inc., the largest U.S. seller of overstocked and discontinued goods, lost 76 cents to $22.42.

Family Dollar Stores Inc., the owner of more than 6,200 U.S. discount stores, slid 69 cents to $27.74. Dollar General Corp., a discount retailer, dropped 41 cents to $15.89. The company in August withdrew its profit forecast for the rest of the year after competitors lowered prices.

Nokia declined 62 cents, or 3 percent, to $20.31. The Finland-based company, which has an annual meeting with analysts and investors in Amsterdam tomorrow, generated more than 50 percent of its global sales in dollars last year.

Negative Impact

In 2005, the company said that a 1.7 percent drop in the dollar had a ``slight negative impact'' on sales. The U.S. currency has depreciated 10 percent versus the euro this year.

Airline stocks retreated after crude oil futures climbed 1.8 percent to $60.32 a barrel in New York, renewing concern that rising fuel costs will erode industry profits.

Financial stocks also declined. The Amex Securities Broker/Dealer Index lost 3.5 percent to 238.17, its steepest fall since Oct. 11.

Oil prices rose after Saudi Arabia's oil minister said the country may support a second cut in OPEC's output this year to prop up prices, which have fallen about a quarter since July. Saudi Arabia is the world's largest oil producer.

Continental Airlines Inc., the fourth-largest U.S. carrier, dropped $3.31, or 7.3 percent, to $42.07.

UAL Corp., the parent of United Airlines, fell $2.81, or 6.3 percent, to $41.63. AMR Corp., which owns American Airlines, dropped $1.90, or 5.6 percent, to $32.20. US Airways Group Inc., which offered $8.67 billion for bankrupt carrier Delta Air Lines Inc., dropped $3.79, or 6 percent, to $59.16.

Ford Declines

Elsewhere, Ford Motor Co. declined 36 cents to $8.16. The automaker, struggling to overcome record losses this year, plans to borrow as much as $18 billion to pay for U.S. job cuts and factory shutdowns.

Scottish Re Group Ltd. slumped 78 cents, or 12 percent, to $5.85. The Bermuda-based reinsurer said Cerberus Capital Management LP and MassMutual Financial Group agreed to buy 1 million preferred shares that can be converted into a 69 percent stake in Scottish Re at any time. The move would dilute the value of shares held by existing shareholders.

S&P 500 shares, called Spiders, decreased $1.93 to $138.42. Nasdaq-100 tracking shares, known by their QQQQ symbol, dropped 99 cents to $43.66.

S&P 500 futures expiring in December fell 19.30 to 1383.60 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures declined 41.25 to 1779.

The Russell 2000 Index, a benchmark for companies with a median market value of $665 million, lost 2.6 percent to 772.10. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, fell 1.5 percent to 13,868.82. Based on its retreat, the value of stocks declined by $265.5 billion.

AMR Corp. (AMR US)
Big Lots Inc. (BIG US)
Continental Airlines Inc. (CAL US)
Dollar General Corp. (DG US)
Family Dollar Stores Inc. (FDO US)
Nokia Oyj (NOK US)
Scottish Re Group Ltd. (SCT US)
UAL Corp. (UAUA US)
US Airways Group Inc. (LCC US)
Wal-Mart Stores Inc. (WMT US)

Special Thanks go out to the following reporters for this fine article:

Michael Tsang in New York at mtsang1@bloomberg.net ;
Nick Baker in New York at nbaker7@bloomberg.net .

Last Updated: November 27, 2006 17:05 EST