Wednesday, December 26, 2007

Most U.S. Stocks Drop on Target's Outlook, Home Price Decline

By Elizabeth Stanton

Dec. 26 (Bloomberg) -- Most U.S. stocks fell for the first time in four days as slower sales at Target Corp. and a bigger- than-expected drop in home prices overshadowed a rally in energy companies.

Circuit City Stores Inc., Big Lots Inc. and Dillard's Inc. led declines in 28 of 31 members of the Standard & Poor's 500 Retailing Index. CB Richard Ellis Group Inc., the world's largest commercial real estate broker, posted its steepest retreat in two weeks. Citigroup Inc., the biggest U.S. bank, fell the most in the Dow Jones Industrial Average after billionaire investor Warren Buffett said he rebuffed financial firms that approached him about buying stakes.

About six stocks fell for every five that rose on the New York Stock Exchange. The S&P 500 added 0.1 percent to 1,497.65 and the Dow average climbed 2.36 to 13,551.69, lifted by Exxon Mobil Corp. after crude oil surpassed $96 a barrel for the first time this month. The Nasdaq Composite Index increased 0.4 percent to 2,724.41, helped by Inc.'s gain.

``The consumer is feeling some pain,'' said Frederic Dickson, chief market strategist at D.A. Davidson & Co., which manages $23 billion in Lake Oswego, Oregon. ``Investors are going to be looking for a spillover effect.''

The S&P 500 is headed for its first quarterly decline since the three months ended June 2006. The benchmark for American equities has risen 5.6 percent this year, while the Dow average and Nasdaq have added 8.7 percent and 13 percent, respectively.

Lower Home Values

Target's forecast that December sales at stores open at least a year may drop 1 percent added to evidence that chain stores will post the weakest holiday sales growth in five years. Retailers in the S&P 500 have tumbled 17 percent as a group this year after home values decline and energy prices climb. The S&P/Case-Shiller index today showed home values slid 6.1 percent in October.

MBIA Inc., the world's largest bond insurer, and Bear Stearns Cos., the fifth-biggest U.S. securities firm, also limited the market's losses after investors disclosed increased stakes.

Target, the second-largest U.S. discount retailer, fell $1.31 to $51.16. Target had previously predicted that December sales at stores open at least a year would rise as much as 5 percent. The lowered forecast ranges from a possible increase of 1 percent to a drop of 1 percent in sales.

Circuit City lost the most in the S&P 500, slipping 6.7 percent to $4.62. Big Lots retreated $1.01 to $15.65. Dillard's, the retailer that operates mostly in the South, slid $1.11 to $19.19. Macy's, the owner of the namesake department store chain and Bloomingdale's, lost $1.06 to a three-year low of $25.95.

Smallest Since 2002

Wal-Mart Stores Inc., the world's biggest retailer, slumped 36 cents to $48.38. The National Retail Federation has forecast a 4 percent increase in total sales for the holidays, the smallest gain since 2002.

``We're definitely heading into a consumer-led recession,'' said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York-based consulting and investment banking firm for retailers. ``Retail stocks have been killed this year and rightfully so, but the worst is yet to come.''

Financial firms in the S&P 500 fell 0.5 percent, bringing their loss this year to 19 percent. CB Richard Ellis slipped 89 cents to $21.75. Citigroup declined 1.7 percent to $30.45.

``We've seen some deals as you can imagine in this period,'' Buffett said today in an interview on CNBC. ``So far, we have not seen a deal that causes me to start salivating.'' Buffett didn't say which firms contacted him.

$96 Billion

The biggest U.S. residential real-estate slump in 16 years has rendered mortgages unaffordable for many homeowners, leading to an increase in foreclosures. The world's biggest banks and brokerage firms have written down the value of their assets, including mortgage-backed bonds, by at least $96 billion.

Energy companies in the S&P 500 added 1.2 percent. Crude oil rose above $96 a barrel in New York for the first time this month as a government report tomorrow may show a U.S. inventory decline and as Turkish planes bombed suspected Kurdish sites in northern Iraq.

Exxon, the biggest U.S. oil company, rose $1.15 to a two- month high of $94.81. Hess Corp. added $2.02 to a record $104.40. rallied $1.84 to $92.85, the highest since Dec. 10. The world's largest Internet retailer said 2007 was its ``best ever'' for holiday sales as Web purchases outpaced overall U.S. spending.

MBIA, Ambac Surge

MBIA and Ambac Financial Group Inc., its smaller rival, had the steepest gains in the S&P 500. Davis Selected Advisers LP, a New York-based money manager that also plans to take a $1.2 billion stake in Merrill Lynch & Co., said today in a filing with the U.S. Securities and Exchange Commission that it increased its stake in MBIA to 5.1 percent.

MBIA rose 11 percent to $22.33. Ambac added 13 percent to $30.14.

Bear Stearns added 49 cents to $89.29. Billionaire investor Joseph Lewis raised his stake for the second time this month. The 70-year-old high-school dropout bought a 7 percent stake in September and increased it to 8 percent earlier in December. He now owns 9.6 percent.

``There's a lot of liquidity around the world, and you're seeing some of it going into supposedly distressed U.S. financial markets,'' said Kent Croft, who manages $650 million at Baltimore-based Croft-Leominster Inc. ``That should help prop up some of these names.''

Buffett's Berkshire Hathaway Inc. rose $520 to $138,500 after agreeing to pay $4.5 billion to gain control of Marmon Holdings Inc., the Pritzker family's closely held collection of 125 companies, in what may be his biggest non-insurance acquisition.

In other markets, Treasury notes dropped after the government's $22 billion sale of two-year securities, the largest auction in more than a year, drew a higher yield than traders expected. Gold rose to a four-week high. Inc. (AMZN US)
Ambac Financial Group Inc. (ABK US)
Bear Stearns Cos. (BSC US)
Berkshire Hathaway Inc. (BRK/A US)
Big Lots Inc. (BIG US)
CB Richard Ellis Group Inc. (CBG US)
Circuit City Stores Inc. (CC US)
Citigroup Inc. (C US)
Dillard's Inc. (DDS US)
Exxon Mobil Corp. (XOM US)
Macy's (M US)
Target Corp. (TGT US)

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