June 17 (Bloomberg) -- U.S. stocks fell for a third day after Standard & Poor’s downgraded the credit ratings of 22 banks and a drop in oil prices dragged down energy shares.
Wells Fargo & Co., BB&T Corp. and Capital One Financial Corp. retreated at least 3.9 percent after S&P said operating conditions for banks will become “less favorable.” Exxon Mobil Corp. and Chevron Corp. slid as a bigger-than- estimated increase in gasoline supplies dragged crude below $70 a barrel. FedEx Corp. tumbled 2.8 percent after forecasting earnings that may be less than half analysts’ estimates.
The S&P 500 declined 0.7 percent to 905.27 at 10:39 a.m. in New York after the index sank 3.6 percent in the previous two days, its worst two-day slump since April. The Dow Jones Industrial Average lost 29.63 points, 0.4 percent, to 8,475.04.
While President Barack Obama said “you’re starting to see the engines of the economy turn,” in an interview with Bloomberg News, he also said a full recovery will “take a long time.” The jobless rate will continue to climb from its current 25-year high of 9.4 percent to 10 percent, he said.
Obama stressed the need for reforms, including overhauling the health-care system, to generate the growth needed to reduce the budget deficit. The president in January inherited the worst financial calamity since the 1930s as the collapse of the subprime-mortgage market spurred almost $1.5 trillion in losses and writedowns at banks worldwide.
Fed Bets
Equity futures rose before the start of trading on growing speculation the Federal Reserve will hold off raising interest rates. Fed officials are considering whether to use next week’s policy statement to suppress speculation they will lift borrowing costs as soon as this year. While policy makers have signaled they accept an increase in longer-term Treasury yields as the economy improves, some are concerned at premature expectations of rate rises.
The cost of living in the U.S. rose less than forecast in May, culminating in the biggest 12-month drop in prices in almost 60 years. The consumer price index increased 0.1 percent after no change a month earlier, the Labor Department said. In the 12 months ended in May, costs dropped 1.3 percent, the biggest decline since 1950.
FedEx Corp. fell 3 percent to $49.88 after citing an “extremely difficult” economy for a disappointing earnings forecast. Earnings for the period ending in August will be 30 to 45 cents a share, FedEx said today, compared the 70-cent average of 11 estimates compiled by Bloomberg. The company didn’t provide a full-year outlook.
‘Raising Questions’
“Transportation is a good leading indicator for the economy because it gives us a sense of the level of orders that were just placed,” said Diane Garnick, who helps oversee $391.3 billion as investment strategist at Invesco Ltd. in New York. “If transportation continues to be as negative as it is now, valuations in the equity market might be looking pricier.”
