Asian Stocks Post Weekly Drop On Global Slowdown Concern By Adam Haigh - Aug 24, 2012

Asian stocks declined for the first week in four, with the region’s benchmark index retreating from the highest level since May, on signs of slower growth in the U.S. and China and amid concern Europe’s leaders aren’t making progress in solving the region’s debt crisis.
Nissan Motor Co., a Japanese carmaker that counts North America as its biggest market, fell 3.8 percent in Tokyo after U.S jobless claims rose more than expected. Aluminum Corp. of China Ltd. fell 2.1 percent in Hong Kong after Dallas Federal Reserve economists said overstated data may have masked the severity of China’s slowdown. Makita Corp. (6586), a Japanese maker of power tools that depends on Europe for more than 40 percent of sales, slid 2.6 percent.
The MSCI Asia Pacific Index (MXAP) slid 0.4 percent to 120.28, erasing an advance for the week during the final day of trading. The gauge closed on Aug. 23 at the highest level since May 4 before a weaker than expected employment report and wilting consumer confidence dragged it lower. About five stocks fell for every three that rose through the week.
“The rally seems to have been a bit more about hope over reality,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “Clearly economic data has been pretty poor. The practicalities of what needs to be done to address this are huge.”
Asia’s equity benchmark climbed more than 10 percent from its lowest level this year June 4 on bets monetary authorities in the U.S., Europe and China would take action to boost slowing economic growth. Stocks on the index were valued at 12.6 times estimated earnings on average, compared with 13.7 for the Standard & Poor’s 500 Index and 11.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Regional Indexes

Japan’s Nikkei 225 Stock Average lost 1 percent this week and South Korea’s Kospi slid 1.4 percent.
Australia’s S&P/ASX 200 Index retreated 0.5 percent as Reserve Bank of Australia Governor Glenn Stevens said policy makers are prepared to respond in the event the economy slows, predicting the nation’s mining investment boom has at least another year before easing.
Exporters across the region fell. Nissan slid 3.8 percent to 765 yen. Makita slid 2.6 percent to 2,933 yen. Cosco Pacific Ltd., a shipping company which operates a port terminal in Greece, declined 2.1 percent to HK$10.40. Hutchison Whampoa Ltd., which gets more than half its sales from Europe, retreated 2.5 percent to HK$68.85.

Jobless Claims

In the U.S., a report showed the number of applications for unemployment benefits climbed last week to a one-month high. Jobless claims rose for a second week to 372,000, exceeding the 365,000 median forecast of economists surveyed by Bloomberg.
German Chancellor Angela Merkel said Europe is in one of its deepest crises, while the country’s finance minister, Wolfgang Schaeuble, said allowing Greece more time to meet its debt obligations would not solve the country’s problems.
Hong Kong’s Hang Seng Index declined 1.2 percent and the Shanghai Composite Index slid 1.1 percent. China may have overstated 2012 industrial production data to conceal the economy’s weakness, Dallas Fed economists Janet Koech and Jian Wang wrote in a paper. Separately, HSBC Holdings Plc cut China’s 2012 growth forecast to 8 percent from 8.4 percent.
Energy and material companies led declines in Asia this past week.

Tinkler Withdraws

Whitehaven Coal Ltd. tumbled 14 percent to A$3.10 after saying Australian mining magnate Nathan Tinkler scrapped his takeover proposal that valued the company at A$5.3 billion ($5.5 billion), triggering the biggest drop in its shares in almost four years.
Cnooc Ltd. (883), China’s biggest offshore oil and gas explorer, slumped 5.1 percent to HK$14.80 after posting a 19 percent decline in first-half profit that was worse than analysts estimated after a spill closed its largest local field.
Aluminum Corp. dropped 2.1 percent to HK$3.27. JX Holdings Inc., a Japanese oil refiner, slid 4.6 percent to 398 yen after a fire at a plant in Sendai and as the company ended a solar- power joint venture.
Among rising stocks, CSL Ltd. soared. The world’s second- biggest maker of blood-derived therapies posted a 13 percent jump in second-half profit, paced by higher immune-treatment sales. The shares advanced 5.9 percent to A$42.30.
China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile-phone company, rose 10 percent to HK$13.10, CHECK to its highest level in more than three months in Hong Kong, after second-quarter profit beat analysts’ estimates.
To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

Tractor Sales Forecast Cut as Sowing Area Drops: Corporate India By Siddharth Philip and Swansy Afonso - Aug 23, 2012

Mahindra & Mahindra Ltd. (MM), the world’s biggest tractor maker by volume, cut its forecast for sales growth of the farm equipment in India as the worst rainfall in three years delays crop sowing.
Mahindra estimates industry sales to expand as little as 2 percent in the year ending March 31, Pawan Goenka, president of the automotive and farm equipment division at the Mumbai-based company, said in an e-mail response yesterday. Goenka had earlier estimated sales to rise as much as 10 percent. Tractor revenue rose 22 percent at Mahindra last fiscal year.
Below-average rains prompted farmer Sandeep Chakane, a cane grower in Maharashtra state, to scrap plans to buy his second Deere & Co. (DE) tractor. The area under monsoon crops in India, the world’s second-largest producer of rice and wheat, dropped 6.2 percent as of Aug. 17, according to data from the farm ministry. Rain was deficient or scanty in 45 percent of the country, the India Meteorological Department said yesterday.
“There is no guarantee of a good crop this year because of less rain,” said Chakane, who was planning to spend 650,000 rupees ($11,774) on the tractor to farm his 12 acres (48,562 square meters) of land. “I will hold on to the cash.”
Mahindra, which has risen 13 percent this year, fell 1.9 percent to 771.05 rupees in Mumbai yesterday. Escorts Ltd. (ESC), India’s second-largest publicly traded tractor maker, lost 1 percent to 64.05 rupees.
Deliveries of the farm equipment accounted for 22 percent of Mahindra’s revenue in the year ended March 31.
Sales at the company co-founded by Chairman Anand Mahindra’s paternal grandfather J.C. Mahindra and his partner Ghulam Mohammed in 1945, may rise 12 percent to 664.3 billion rupees in the fiscal year, according to a median estimate of 10 analysts compiled by Bloomberg. That’s the slowest pace of growth in four years, according to data compiled by Bloomberg.

Sowing Area

Rice sowing dropped 3.4 percent to 30.8 million hectares from a year earlier, the farm ministry said. Cotton area declined to 11.02 million hectares from 11.7 million hectares, and oilseeds area slid to 16.1 million hectares from 16.7 million hectares, it said.
“The spatial pattern of monsoon suggests that output losses could be substantial for coarse cereals and pulses,” the Reserve Bank of India said in its annual report released yesterday. “The monsoon has been unsatisfactory to a degree that has dampened the prospects for agriculture during” the year that started April 1, according to the report.
The central bank on July 31 raised its inflation forecast to 7 percent as scanty monsoon stokes price pressures. The Reserve Bank cut its growth estimate for Asia’s third-largest economy, which expanded at its slowest pace in almost a decade in the three months ended March 31, to 6.5 percent.

Overseas Sales

Tractor sales may be little changed at 625,888 units in the 12 months starting April 1 after an 11 percent expansion a year earlier, according to credit assessor ICRA Ltd. (ICRA)
Companies including International Tractors Ltd. and Tractors & Farm Equipment Ltd., or TAFE, are tapping overseas markets and adding products to lure customers in the construction industry.
International Tractors, the maker of the Sonalika brand, plans to raise funds selling a stake and use the proceeds for acquisitions in Europe and expansion overseas, Chairman L.D. Mittal said.
International Tractors’ exports surged 49 percent this year, Mittal said. TAFE forecasts it will add to the 22,000 tractors it sold in the U.S. last year even as a drought ravages the North American nation, according company spokesman Vijaykumar Browning. Mahindra sold more than 10,000 units in the U.S. last year, according to its annual report.

New Products

“The U.S. market is doing well for us,” Mahindra’s Goenka said. The company’s overseas sales increased 16 percent to 13,722 in the 12 months to March.
Overseas sales look “promising through inclusion of new export destinations, increased product offerings in the higher horse power segment and ramping up of capacities,” said Subrata Ray, co-head for corporate-sector ratings at ICRA. Companies have also expanded their “product portfolio to come out with more application-based offerings, and to cater to niche market segments,” he said.
Weak demand in India and Latin America prompted Deere, the world’s largest maker of agriculture equipment, to cut its full- year profit forecast to $3.1 billion on Aug. 15 from a May estimate of $3.35 billion.
Asia sales will drop “moderately” in the year because of “softening” in India and China, Deere said. The U.S. company accounted for 9.2 percent of India’s tractor market in the year ended March 31. Mahindra controlled 39 percent, while TAFE had 24 percent share, according to ICRA.

Tractor Dealers

For tractor dealers in western Indian states such as Maharashtra, home to India’s commercial capital Mumbai, the drop in sales may be larger after a 30 percent rain deficit since June 1.
“Customers who have booked the tractor have left their cash deposits with me and are saying that they will only take delivery once the rains come,” said Sopan Tupe, owner of a TAFE dealership in Pune, the state’s second-largest city. Tupe expects to sell just half of the 100 tractors he sold last year.
To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Iran Curbs Drive Rice Exporter to Africa Market: Corporate India By Prabhudatta Mishra - Aug 22, 2012

KRBL Ltd. (KRB), India’s biggest basmati rice exporter, plans to seek new markets in Africa to counter international sanctions against Iran and revive profit amid sliding grain prices.
Rising demand among Indian immigrants and natives of Kenya, Senegal, Nigeria and Ethiopia for the aromatic, long variety may help reverse two years of decline in earnings, Chairman Anil Mittal said in a phone interview. Net income may almost double to 1.25 billion rupees ($23 million) in the year ending March 31, from 730 million rupees in the previous 12 months, he said. The cereal is used to make dishes including biryani and pilaf.
“For us, the new market will be east and west Africa as rising income there drives demand for these products,” Mittal said, without elaborating on the potential volume. “If the entire continent is covered, it will be a big quantity.”
A 25 percent drop in prices of basmati rice in the 12 months to March eroded earnings of the New Delhi-based company, while its shares have plunged 70 percent from a record high reached in October 2010. Trade restrictions on Iran, the world’s biggest buyer of the grain, have resulted in payment hurdles for Indian shippers, prompting KRBL to look elsewhere for growth. The All India Rice Exporters’ Association expects basmati exports to increase 25 percent this year.

Region Specific

India, the largest grower of basmati rice, controls 65 percent of the overseas market, according to the state-run Agricultural and Processed Food Products Export Development Authority, or APEDA, while Pakistan, the only other main producer in the world, accounts for the rest. The rice variety, specific to a geographic region like scotch whiskey, is cultivated in the states of Haryana, Uttar Pradesh and Uttarakhand in India, and in Punjab that straddles both the South Asian countries.
Exports accounted for about 58 percent of KRBL’s revenue in the year ended March 31, 2010, according to data compiled by Bloomberg, with the Middle East making up for more than 50 percent.
Net income dropped 39 percent in the year ended March 31 because of falling prices and currency hedging losses from the rupee’s 12 percent slump against the dollar during the period. The slump in shares has driven its market value down to 5.7 billion rupees from 6.5 billion rupees in March 2011.
The stock fell 0.4 percent to 23 rupees yesterday in Mumbai.
“Foraying into new markets is good for any company,” said Batlivala & Karani Securities Pvt.’s Ayyathurai Rajkumar, the only analyst who tracks the stock, according to data compiled by Bloomberg. He rates it underperform, with a one-year target price of 18 rupees.

China Imports

KRBL, which sells the flagship ‘India Gate’ basmati rice, has two processing plants in Punjab and Uttar Pradesh operating below their total capacity of 1.4 million tons of paddy a year.
India produced about 5 million tons of basmati rice in the year ended March 31, of which it exported 3.2 million tons. Outbound shipments may increase to 4 million tons in the current year, said M.P. Jindal, president of the All India Rice Exporters’ Association.
China, the biggest consumer of rice, has agreed to allow basmati imports from India after sorting out regulatory issues, the Press Trust of India reported on June 21, citing India’s Foreign Secretary Ranjan Mathai.
India’s northern neighbor can buy as much as 10,000 tons of the grain in the first year, opening up a market closed to Indian shippers, according to A.K. Gupta, an adviser to APEDA.
“We are expecting demand mainly from hotels, restaurants and expatriates,” he said.

Prices Decline

Prices of basmati rice dropped to $845 a ton as of March 31, 2012, from as high as $1,133 in April 2011, according to data provided by APEDA, eroding profit margins for KRBL.
The company has scaled back outbound shipments to Iran after some buyers in the Persian Gulf nation defaulted on payments as the rial slumped amid trade sanctions imposed by the U.S. and the European Union to discourage what they say is the Persian Gulf country’s pursuit of a nuclear bomb. Iran says its atomic program is for peaceful purposes.
Two Iranian private companies owed nine Indian rice exporters about 1.84 billion rupees ($33 million) as of February, Jyotiraditya Scindia, junior trade minister, said on March 14.
KRBL exported as much as 12,000 metric tons of basmati rice to Iran last year, Mittal said, and expects to capture 10 percent of the 1 million-ton market if the sanctions are lifted.
India exported $2.7 billion worth of goods to Iran in the financial year that ended March 2011, according to the Department of Commerce. Iron and steel items were the biggest category, accounting for $623 million.
“We are zero today in Iran,” said Mittal. “Though I am looking at new markets, the question is of securing payments and how to do business there. Until we are sure about payments, we won’t be able to enter that market.”
To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

Chairman Tata Seeks to Salvage World’s Cheapest Nano Car By Siddharth Philip - Aug 21, 201

Ratan Tata wants another shot at promoting the Nano, conceived by the Tata Motors Ltd. (TTMT) chairman as the world’s cheapest car and whose sales plunged and never fully recovered after at least three caught fire.
The Nano, which starts at 141,898 rupees ($2,565) was developed as an upgrade option for millions of Indian motorcycle owners. First introduced in 2009, demand fell to a record low of 509 units in November 2010 after the cars caught fire. Sales have since lagged behind pricer models even after the company said the fires were isolated incidents.
“The Nano is something I would love to make successful because I don’t think it’s exploited its full potential right now,” Tata said in an interview with Bloomberg TV India, broadcast yesterday. “There has to be another push to make Nano what it can be.”
Tata, due to retire in December after running the Tata group for two decades, decided to develop the car after seeing a family riding on a scooter. The car faced problems even before sales began, with the company having to abandon a near-complete factory in West Bengal state because of violent protests by farmers demanding the return of land acquired for the site.
After the fires, the company in December 2010 lengthened warranties to four years or 60,000 kilometers (37,290 miles) and started offering as much as 90 percent financing through unit Tata Motors Finance Ltd.
An increase in borrowing costs however pinched the budgets of consumers that Tata Motors targeted to upgrade from motorcycles. Many chose cheaper two-wheelers instead, hitting sales of the Nano.

New Features

“Tata will have to refresh the Nano with new features as competitors such as Maruti and Hyundai are also stepping up their efforts,” said Umesh Karne, an analyst at BRICS Securities Ltd. in Mumbai. “If they manage to introduce new features and maintain a competitive price, I think its possible to resurrect the Nano.”
Tata said in January that the automaker is working on the vehicle’s upgrades to undo the “stigma” attached to the hatchback. The company wasn’t “adequately ready” with advertising campaigns and a dealer network when it started sales of the car in 2009, he told reporters then.
The automaker introduced a new version of the compact with a more powerful engine in November and said in December that it would change the starter motor in about 115,000 Nanos as part of efforts to improve the vehicle’s performance.

Nano Sales

Tata Motors sold 5,485 Nanos in July, an increase of 68 percent over the same period a year earlier though still a fraction of the 20,000 units a month the dedicated factory at Sanand in the western Indian state of Gujarat is capable of making.
The Mumbai-based automaker sold a total of 74,527 Nanos in the year ended March 31, giving it a 10 percent share in the mini and micro car segments, according to data from the Society of Indian Automobile Manufacturers. Maruti Suzuki India Ltd. (MSIL), rocked by worker riots last month, sold 491,389 units in the same period for a 69 percent share.
Tata Motors chose the first 100,000 customers for the Nano through a lottery from the 206,703 orders it got in the initial sales period in April 2009. The car was first displayed at the New Delhi auto show in 2008.
“The fact that we did achieve what we set out to achieve to design and build an affordable family car for the people is an achievement I was very proud of,” said Tata.
“I would love to be involved rather than think this is the level that” Nano sales can be, he said.
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

Indian Rate Cut Will Depend on Inflation Easing, Gokarn Says By Kartik Goyal - Aug 19, 2012

India can only consider cutting interest rates when inflation starts to show “very sustainable signs of moving down,” Reserve Bank of India Deputy Governor Subir Gokarn said.
“Our position on that is very clear,” Gokarn said in Goa yesterday. “It’s always balancing between inflation risks and growth risks” and price gains are currently the “dominant” threat, he said.
The central bank refrained from joining a wave of rate cuts from China to Brazil in July as it fights the fastest inflation among the biggest emerging nations. A moderation in investment has contributed to the slowest economic growth in nine years and left bottlenecks unresolved, sustaining price pressures.
“We have both oil and food as pressure points that have re-emerged” Gokarn said in a question and answer session after a speech to the Forex Association of India. “We cannot ignore” that risk, he said. “If we do, there is a likelihood of inflation resurging very quickly and requires even more aggressive action. That’s not the scenario we want to take a chance on.”
Inflation eased to a 32-month low of 6.87 percent in July yet remains the highest among BRIC economies, the group of nations comprising Brazil, Russia, India and China. The plunge in the rupee and the impact on crops of the weakest monsoon since 2009 threaten to fan price rises.
Speaking in Bangalore on Aug. 18, Gokarn said there is a “high risk” that the increase in pulse prices will accelerate.
The rupee has weakened about 18 percent against the dollar in the past year. It slid 0.8 percent to 55.7450 per dollar in the week ending Aug. 17.

Elevated Inflation

The BSE India Sensitive Index rose 0.2 percent on Aug. 17, taking the week’s gains to 0.8 percent. The yield on the 8.15 percent government bond due June 2022 increased seven basis points, or 0.07 percentage point, for the week to 8.24 percent, according to the central bank’s trading system.
Prime Minister Manmohan Singh is struggling to salvage his development agenda as elevated inflation, graft scandals and gridlock over attempts to open up the economy deter investment. Reviving economic expansion is a matter of national security, Singh said in his annual Independence Day speech on Aug. 15.
Indian gross domestic product rose 5.3 percent in the three months through March from a year earlier, the least since 2003.
The Reserve Bank left interest rates unchanged for a second meeting last month at 8 percent. It hasn’t lowered the benchmark repurchase rate since a 0.5 percentage-point cut in April which was the first since 2009. The RBI’s next meeting is scheduled for Sept. 17.

Ratings Downgrade

Finance Minister Palaniappan Chidambaram said on Aug. 18 he urged banks to follow the State Bank of India which has lowered retail lending rates. He spoke in New Delhi after meeting the heads of state-run banks.
Risks such as a budget shortfall and a current-account deficit have led Standard & Poor’s and Fitch Ratings to say they may strip India of its investment-grade credit rating.
“Our formal stance is that actions needed to avoid such an outcome are very clear and we have been pushing for fiscal consolidation in a systematic way for quite some time,” Gokarn said yesterday in response to a question on the threat of a ratings downgrade. “It’s clearly from our viewpoint a factor that is weakening the transmission of our policy actions. It’s also a contributory factor to the risk perception.”
India’s budget deficit was 5.8 percent of gross domestic product in the 12 months ended March, the widest among the largest emerging markets. Singh’s administration is seeking to narrow the shortfall to 5.1 percent in the current fiscal year.

Curb Spending

Forecasters from Citigroup Inc. to Crisil Ltd., the local unit of Standard & Poor’s, predict the gap will instead widen as the government fails to curb spending sufficiently.
Moody’s Investors Service has said power blackouts on July 30-31, India’s worst, underscore infrastructure gaps and have a “credit negative effect” on economic activity.
Officials this year have stepped up the struggle to steady the rupee. The efforts include boosting the amount of government bonds foreign investors can buy and curbs on trading in currency derivatives to rein in volatility.
India has also moved to increase the supply of dollars by cutting the amount of overseas income companies can hold in foreign currency and raising interest rates on non-rupee deposits.
Sustained growth, a low current-account deficit and low inflation rate are needed for a stable currency, Gokarn said yesterday.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

S&P 500 Caps Longest Weekly Rally Since January 2011

By Rita Nazareth - Aug 18, 2012

U.S. stocks rose for a sixth week, giving the Standard & Poor’s 500 Index its longest rally since January 2011, as economic reports beat forecasts and Germany backed the European Central Bank’s bond-buying plan.
Apple Inc. (AAPL), the world’s most valuable company, jumped 4.3 percent to a record and surpassed $600 billion in market value on speculation that production has started on a smaller version of the iPad tablet as well as a new television product. Cisco Systems Inc. (CSCO), the biggest maker of computer-networking equipment, climbed 8.7 percent as profit and sales exceeded analysts’ projections. Sears Holdings Corp. (SHLD), the retailer controlled by Edward Lampert, surged 16 percent after reporting a smaller quarterly loss.
The S&P 500 (SPXL1) rose 0.9 percent to 1,418.16, bringing its gain for the year to 13 percent. The Dow Jones Industrial Average added 67.25 points, or 0.5 percent, to 13,275.20. On the last day of trading, it touched the highest level since December 2007. (INDU) The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 8.8 percent to 13.45, a five-year low.
“Perhaps we ran out of sellers,” said Michael Shaoul, chairman of Marketfield Asset Management, which oversees about $2.7 billion in New York. “Better economic data helps. Corporate earnings didn’t fall apart. If you’re not involved, you could be a long way behind this market.”
Equities rose, sending the S&P 500 near a four-year high reached in April, as data showed rising U.S. industrial production while consumers and homebuilders gained confidence. The reports helped ease concern that the European debt crisis and slowing demand in Asia will weaken the U.S. recovery.

German Priorities

Investor concerns over Europe also faded after German Chancellor Angela Merkel said the ECB’s insistence on conditionality in return for help to lower borrowing costs in indebted countries matches her country’s priorities to end the crisis in the euro region. A person familiar with the matter said Spain is about to get an emergency disbursement from a 100 billion-euro ($123 billion) bailout package.
American companies, which posted the weakest results since 2009, have beaten earnings estimates for a 14th straight quarter, according to data compiled by Bloomberg. More than 72 percent of S&P 500 (SPX) companies reported second-quarter profits that topped projections even as 59 percent missed sales forecasts.

Stimulus Bets

Since reaching a four-month low on June 1, the S&P 500 has climbed 11 percent amid bets on economic stimulus. The rally has pushed the gauge to a valuation level of 14.4 times reported earnings, which is still below the average since 1954 of 16.4, data compiled by Bloomberg showed.
Stocks rallied amid a slowdown in volume as vacationing traders awaited policy clues from the Federal Reserve’s summit in Jackson Hole, Wyoming. On Aug. 13, U.S. equity volume reached the lowest level since at least 2008 excluding holidays. About 4.5 billion shares changed hands on all venues that day, the lowest level in data compiled by Bloomberg going back four years that excludes the days surrounding New Year’s, Christmas, Thanksgiving and Independence Day.
Fed Chairman Ben S. Bernanke will have a chance to talk more about policy options at the Kansas City Fed’s conference Aug. 30 to Sept. 1. His speech at the 2010 conference set the stage for a second round of asset purchases. Faster job growth is needed to push down an unemployment rate that has been stuck above 8 percent since February 2009, according to Northern Trust Corp.’s James McDonald.

‘Fragile Recovery’

“The recovery is fragile,” said McDonald, chief investment strategist at Northern Trust in Chicago, whose firm manages $704.3 billion. “As we look at what the Fed is going to do, I would say that they will still lean toward some further accommodation. If we get better data between now and the September meeting, they might pull back.”
The Fed next month will hold off from a third round of bond buying, known as quantitative easing, amid better economic figures, Goldman Sachs Group Inc. said in a report.
So-called cyclical companies, which generate profits that are more sensitive to changes in the economy, had the biggest gains in the S&P 500 among 10 industries. Technology and clothing retailers climbed at least 1.8 percent. Utility, health-care and phone companies in the S&P 500 declined.
Technology shares, which comprise 20 percent of the S&P 500, have rallied for five straight weeks in the longest run since April.

Apple, Cisco

Apple jumped 4.3 percent to $648.11. With tablet sales predicted by research firm Yankee Group to overtake those of personal computers by 2015, Apple is introducing a smaller iPad model to fend off challengers to its top-selling device. The tinier iPad may go on sale by October and a new television could reach stores by 2013, according a research report from Peter Misek, an analyst at Jefferies & Co.
Cisco Systems added 8.7 percent, the biggest weekly gain since 2009, to $19.06. Chief Executive Officer John Chambers has cut 7,800 jobs, shut businesses and reduced prices to win business lost to Juniper Networks Inc. (JNPR) and Hewlett-Packard Co. (HPQ) and combat a slowdown in Europe, which makes up a fifth of sales. The company boosted its dividend by 75 percent.
Sears soared 16 percent, the most in the S&P 500, to $59.49. The company has been working to keep the retailer’s inventory in line with customer demand, with domestic levels decreasing by $512 million from the year-ago period. The lower cost of sales in the quarter helped Sears’s gross margin widen to 26.7 percent of sales from 25.7 percent a year earlier.

Remodeling Projects

Home Depot Inc. (HD) gained 6.9 percent to $56.73, the highest price since 2000. The largest U.S. home-improvement retailer reported second-quarter profit that topped analysts’ estimates and raised its forecast for profit this year as customers spent more on remodeling projects.
Abercrombie & Fitch Co. jumped 12 percent, the most since April 2011, to $35.93. The teen retailer authorized additional share buybacks and reported second-quarter profit that topped the company’s preliminary report earlier this month. It also said in a statement that it will be “disciplined and judicious” with shareholder capital.
Target Corp. (TGT) added 2.1 percent to $64.14 after raising its annual profit forecast as the second-largest U.S. discount retailer increases sales by adding groceries and enticing more spending from customers with a discount card.
Estee Lauder Cos. gained 11 percent to $61.61. The maker of Mac cosmetics and Clinique skin care reported fourth-quarter profit and sales that topped analysts’ estimates.

Homebuilders Jump

A measure of homebuilders in S&P indexes jumped 5 percent to the highest level since April 2008. PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, climbed 7.2 percent to $13.38. KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, rose 6.8 percent to $11.04.
Staples Inc. (SPLS) tumbled 15 percent to $11.34 after the office- supply retailer cut its annual sales and profit forecast amid slower growth in the U.S. and tepid demand in Europe.
Wal-Mart Stores Inc. (WMT) slumped 2.3 percent to $71.99. The world’s largest retailer retreated as its forecast for profit this year trailed some analysts’ estimates amid slowing sales growth in the U.S.
Deere & Co. (DE) retreated 3.1 percent to $76.94 after cutting its full-year profit forecast as sales slow in Asia and Latin America, undermining the growth strategy at the world’s largest manufacturer of agricultural equipment.
Facebook Inc. plunged 13 percent to $19.05, the lowest price since its initial public offering in May, after the end of restrictions on share sales by its biggest investors. The stock traded 50 percent below its IPO price of $38. (FB)

Coupon Sales

Groupon Inc. (GRPN) sank 36 percent to $4.75, a record low. The largest daily-deal website reported second-quarter revenue that missed estimates as economic weakness in Europe curbed online coupon sales. Evercore Partners Inc. downgraded Groupon shares, citing a potential for billings to decline.
Investors also watched second-quarter filings from asset managers, which showed a shift to stocks that are least tied to economic growth. Asset managers increased holdings the most in health-care stocks and companies that make household goods on concern about an economic slowdown. They reduced weightings in technology and energy shares.
Johnson & Johnson (JNJ), the biggest health-care products company, had the largest increase in money managers’ positions, according to second quarter regulatory filings from investment firms with at least $100 million in U.S. equities. Apple had the seventh-biggest decrease in ownership.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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