U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest weekly decline in 2012, as consumer confidence dropped, China’s growth slowed and the cost of insuring against a Spanish default rose to a record.
Financial (S5FINL) shares dropped the most among 10 industries in the S&P 500, following a plunge in European lenders. JPMorgan Chase & Co. (JPM:US) and Bank of America Corp. (BAC:US) retreated at least 3.6 percent. Technology shares, which account for 21 percent of the S&P 500, fell 1.6 percent as a group today and had the first weekly slump this year. Google Inc. (GOOG:US) tumbled 4.1 percent as the world’s largest Internet-search company plans a new stock structure that gives management more leeway in issuing shares.
The S&P 500 slid 1.3 percent to 1,370.26 at 4 p.m. New York time, extending its weekly decline to 2 percent. It fell a second week for the longest losing streak since November. (SPX) The Dow Jones Industrial Average lost 136.99 points, or 1.1 percent, to 12,849.59. About 6.2 billion shares changed hands on U.S. exchanges today, or 9 percent below the three-month average.
“Let’s not get overly concerned, but yes, there are concerns out there that we need to look at,” Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp., which has $1.81 trillion in client assets, said in a telephone interview. “China has been disappointing, U.S. consumer confidence adds to the pressure and Europe is not out of the woods yet.”
Stocks fell as confidence among U.S. consumers cooled in April from a one-year high. China’s growth slowed to the least in almost three years. Credit-default swaps on Spain surged as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.
Today’s decline in stocks follows the biggest two-day rally in 2012. The S&P 500, which had the best first-quarter since 1998, was still up 9 percent this year as investors bought stocks amid better-than-estimated economic data and expectations that Europe would tame its debt crisis.
“The first quarter was a relief that things were not going to be as bad,” said Virginie Maisonneuve, head of global equities at Schroder Investment Management Ltd., which oversees $291 billion, said in a phone interview from London. “Since then, there are question marks of liquidity. We have a lot of liquidity in the world, but what next?”
Concern about the global financial system drove banks lower even after JPMorgan and Wells Fargo & Co. (WFC:US) reported earnings that beat estimates. The KBW Bank Index (BKX) slumped 3.1 percent as all of its 24 stocks retreated. Bank of America sank 5.3 percent, the most in the Dow, to $8.68. JPMorgan lost 3.6 percent to $43.21. Wells Fargo dropped 3.5 percent to $32.84.
Quarterly reports scheduled for next week include Citigroup Inc. (C:US), Goldman Sachs Group Inc. (GS:US), Bank of America (BAC:US) and some of the largest technology companies. International Business Machines Corp., which comprises 12 percent of the Dow; Intel Corp., the world’s biggest chipmaker; and Microsoft Corp. (MSFT:US), the largest software maker, are due to announce their results. Yum! Brands Inc. (YUM:US), which surged 2.8 percent to $72.86 today for the biggest gain in the S&P 500, is also scheduled to report.
While S&P 500 per-share profit growth slowed to 1.7 percent during the first three months of the year from 4.9 percent in the fourth quarter, it will accelerate to 8.6 percent during all of 2012, according to analyst estimates compiled by Bloomberg.
Google tumbled 4.1 percent to $624.60 even as earnings beat estimates. The bid to preserve control for founders Larry Page and Sergey Brin raised concern among corporate-governance watchdogs. Google unveiled a plan that lets the company issue new shares without diluting the founders’ voting power.
The stock change would create a new class of nonvoting shares that will be distributed to existing shareholders in what is effectively a 2-for-1 stock split. For investors, the result is a lack of input on decision making, said Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance.
“Shareholder voting rights are pretty limited in Google,” he said. “And this basically perpetuates that reality.”
Apple Inc. (AAPL:US) sank 2.8 percent, the most since October, to $605.23. After rising to a record on April 9, the most valuable technology company fell for a fourth day in the longest losing streak since December.
Coinstar Inc. (CSTR:US) surged 7.3 percent to $65.78. The owner of the Redbox movie-rental kiosks said first-quarter sales and profit exceeded its previous projection (CSTR:US) and lifted its earnings forecast for 2012 to at least $4.40 a share.
Concern about the global financial system’s stability has grown so much during the past two weeks that investors ought to take less risk, according to Bank of America (BAC:US)’s Merrill Lynch unit.
Forty market-related gauges go into the Bank of America indicator, and 10 of them surged far enough to send a so-called critical stress signal three days ago. The “risk-off” warning was the first since July 12, just before a second-half retreat in stocks got under way.
“We recommend caution,” Benjamin Bowler, head of global derivatives research, and two colleagues wrote in a report two days ago. The MSCI All-Country World Index declined by an average of 3.8 percent in periods when the signal was in place since 2000, the report said.
The stress index’s components reflects the potential worsening of a euro-region debt crisis, according to Bowler, based in San Francisco, and Anders Armelius and Abhinandan Deb, his London-based colleagues.
Credit-default swap rates for government borrowers are showing the most stress, according to their data. A CDS-based based indicator was at 4.1 three days ago. Readings above zero show stress is higher than normal.
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