U.S. stocks declined, halting a
five-day advance in the Standard & Poor’s 500 Index, as the
European Central Bank’s balance sheet increased to a record
after a surge of bank lending to stem the region’s debt crisis.
 |
| Traders work at the New York Stock Exchange on Dec. 27, 2011. Photographer: Scott Eells/Bloomberg |
The S&P 500 lost 1.2 percent to 1,249.89 at 4 p.m. New York
time, according to preliminary closing data. The benchmark gauge
for American equities erased its 2011 gain and fell below its
average price of the past 200 days. (SPX)
“The economy is not benefiting from the ECB lending to
banks,” Timothy Ghriskey, who oversees $2 billion as chief
investment officer of Solaris Group LLC in Bedford Hills, New
York, said in a telephone interview. “With Europe likely to
lapse into a recession, banks are reluctant to actually lend.”
Equities slumped as the ECB’s balance sheet soared to a
record 2.73 trillion euros ($3.55 trillion). The ECB last week
awarded 523 banks three-year loans totaling a record 489 billion
euros to encourage lending. So far, banks are parking the money
back at the ECB. Overnight deposits at the central bank
increased to an all-time high of 452 billion euros yesterday.
Strategists’ Forecast
With two more trading days left in 2011, the S&P 500 would
need to rise about 2.5 percent to reach the year-end forecast of
Wall Street strategists. Their mean estimate of 1,282 is lower
than the 1,371 predicted in January, according to data compiled
by Bloomberg. Today’s decline sent the S&P 500 down 0.6 percent
for the year. Still, a 10.5 percent rally since the end of
September put the gauge on pace for the best fourth-quarter
since 2003.
Stock-futures rose early in the day as Italy sold 9 billion
euros ($11.8 billion) of six-month Treasury bills and borrowing
costs fell from the previous auction. A bigger challenge for the
ECB’s lending on demand for European bonds comes tomorrow when
Italy sells as much as 8.5 billion euros of longer-maturity
debt.
“The easier part of Italy’s bond auctions this week took
place earlier today,” Peter Boockvar, equity strategist at
Miller Tabak & Co. in New York, wrote in a note. “But a good
test of the appetite for Italian debt will be tomorrow’s bond
sales that have maturities past three years.”
To contact the reporter on this story:
Rita Nazareth in Sao Paulo at
rnazareth@bloomberg.net
To contact the editor responsible for this story:
Nick Baker at
nbaker7@bloomberg.net
