Macy’s rallies, but market falls

Written on December 19, 2008

NEW YORK — Stocks fell Wednesday and the Standard & Poor’s 500 Index retreated from a five-week high on concern the Federal Reserve has few tools left to combat the recession after cutting its benchmark interest rate to a record low.

Newell Rubbermaid Inc., the maker of Calphalon cookware, tumbled the most in at least 28 years as the shrinking economy forced it to reduce its 2008 profit forecast. Apple Inc. slid 6.6 percent after the maker of the iPhone said Chief Executive Officer Steve Jobs wouldn’t speak at the Macworld Expo, spurring concern that the leader’s health is deteriorating. Macy’s Inc. rallied 18 percent, helping to trim the markets losses, after lenders relaxed terms on a $2 billion credit line.

"The economic environment isn’t going to change a lot," said Warren Koontz, who oversees $2.5 billion as chief investment officer for large-company value stocks at Loomis Sayles & Co. in Boston. Loomis manages $105 billion. "We do have to pay penance for the over-living of the past decade."

The S&P 500 lost 1 percent to 904.42. Technology and energy shares were the biggest drag on the index as Apple tumbled and oil slid below $40 a barrel for the first time in four years. The Dow Jones Industrial Average declined 99.8 points, or 1.1 percent, to 8,824.34. The Russell 2000 Index of small U.S. companies added 0.8 percent.

Wednesday’s decline erased about one-fifth of Tuesday’s 5.1 percent rally in the S&P 500, which was sparked by the Fed’s reduction of its benchmark rate to a range of 0 to 0.25 percent and its plan to use all available tools to revive the economy. The dollar tumbled the most against the euro since its debut in 1999 and sank to a 13-year low versus the yen after the rate cut.

Newell Rubbermaid Inc. fell 27 percent to $9.58. The company, which also makes Graco baby products, lowered its full-year profit forecast because of the significant deterioration of global economic conditions and said it was cutting 8 percent to 10 percent of its salaried workforce guaranteed pay day loans.

Apple lost $6.27 to $89.16. Oppenheimer & Co. analyst Yair Reiner downgraded Apple to perform from outperform, saying it’s past time for Apple to disclose the state of Jobs’ health or outline a plan for a successor. Apple also said the company would no longer participate in the MacWorld show after next month’s event.

Macy’s, the second-largest U.S. department store company, jumped 18 percent to $10.01. The amended credit agreement helps remove doubts about the company’s ability to pay off $950 million in debt maturing next year. The size on the $2 billion facility, led by Bank of America Corp. and JPMorgan Chase & Co., and the maturity date of Aug. 31, 2012, are unchanged, Macy’s said in a statement. The facility remains untapped, it said.

The S&P 500 Retailing Index advanced 1.2 percent as 24 of its 27 companies rose.

"We have kind of a push and pull between an economy that’s in recession, and probably getting worse right now, and a credit market that’s actually starting to heal or at least show signs of healing," said Richard Campagna, chief investment officer of 300 North Capital LLC in Pasadena, California, which manages $1 billion.

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