U.S. stocks decline as Cyprus bank levy renews euro concerns

Mounting Pressure

Chief Executive Officer Tim Cook, who a year ago this month reinstated a dividend and announced a $10 billion buyback, faces mounting pressure to take bolder steps to pay out more of Apple’s $137.1 billion in cash and investments. Investors including David Einhorn’s Greenlight Capital Inc. are pushing for more money as growth slows and competition from rivals such as Samsung Electronics Co. intensifies.

“The accumulation of cash has become excessive,” Brian White, an analyst at New York-based Topeka Capital Markets Inc., said in an interview. He rates the shares a buy, with an $888 price target. “It doesn’t matter which bearish scenario you forecast, they’re never going to need this much cash.”

Hewlett-Packard gained 2.6% to $22.75, rising the most in the Dow. Morgan Stanley raised its rating on the stock to overweight, citing potential for the company to return more cash to investors. Hewlett-Packard may generate free cash flow of about $6.7 billion in the 2013 fiscal year, almost 35% more than the company’s $5 billion forecast, according to Katy Huberty, an analyst at Morgan Stanley.

Phone stocks had the biggest gain among S&P 500 groups, adding 0.3%. Verizon Communications Inc. climbed 1.7% to $48.81 as Citigroup lifted its rating to buy from neutral, saying a buyout of Vodafone Group Plc’s stake in their wireless venture would add to earnings.

Market Swings

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, surged 15% to 12.98, after dropping 10% last week to its lowest level since February 2007. The gauge, known as the VIX, is down 28% this year.

Traders are placing a record number of bets that U.S. stock-market swings will increase after a six-year low in the VIX fueled speculation volatility has fallen too far, too fast.

The shares outstanding for the iPath S&P 500 VIX Short-Term Futures ETN, the most-active security that tracks changes in VIX futures, has climbed 95% to an all-time high of 61.9 million this year, data compiled by Bloomberg show. The total for the ProShares Ultra VIX Short-Term Futures is up 10-fold to 39.9 million last week, data compiled by Bloomberg show.

“If you look at the economy and all the political issues, then there are a lot of headwinds out there. And yet the market just continues to go,” Frank Braddock, senior portfolio manager with the Braddock Group of JHS Capital Advisors, said by phone from Columbia, South Carolina, on March 15. JHS oversees about $3.4 billion. “The fear I have is that if this psychology of wanting to push the market higher changes, then we’ll see a pretty sharp pullback and a spike in volatility.”

Bloomberg News

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