Bloomberg News

U.S. Stocks Fall as S&P 500 Has Worst Weekly Drop in 2012

May 05, 2012

Traders on the floor of the New York Stock Exchange on April 30, 2012. Photographer: Michael Nagle/Bloomberg

Traders on the floor of the New York Stock Exchange on April 30, 2012. Photographer: Michael Nagle/Bloomberg

U.S. stocks slumped, sending the Standard & Poor’s 500 Index to its biggest weekly retreat this year, as data on the American and European labor markets boosted concern the global economy is weakening.

All 10 industry groups in the S&P 500 fell except for phone stocks. Gauges for commodity producers tumbled more than 3.3 percent as Marathon Oil Corp. (MRO:US) missed earnings estimates and crude dropped below $100 a barrel for the first time since February. An S&P 500 index (SPX) of technology shares slid 3.8 percent amid Apple Inc. (AAPL:US)’s biggest decline since October and JDS Uniphase Corp. (JDSU:US)’s sales projection that trailed estimates. Sunoco Inc. surged 23 percent after agreeing to be bought for $5.3 billion.

The S&P 500 fell 2.4 percent to 1,369.10, snapping a two- week rally and trimming its gain for the year to 8.9 percent. The Dow Jones Industrial Average slipped 190.04 points, or 1.4 percent, to 13,038.27, after the 30-stock gauge climbed on May 1 to its highest level since 2007.

“We’ve been steadily raising cash,” Frank Ingarra, who helps manage $1.5 billion at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. “We’ve had a really nice rally. Slower growth in the U.S., as characterized by the worse-than-expected labor reports, kind of put a little water on the fire.”

Stocks rose May 1 as manufacturing expanded in April at the fastest pace in 10 months. Equities retreated during the next three days as optimism over global growth faded amid more data that disappointed investors. U.S. employers added fewer jobs than forecast, the American service sector slowed and euro- region unemployment rose to a 15-year high. The jobs report on the final day of the week sent the S&P 500 tumbling 1.6 percent.

Turning Negative

The benchmark index has dropped 3.5 percent from a four- year high on April 2 amid concern weaker economic reports would help spur a repeat of losses that began in May during the last two years. The Citigroup Economic Surprise Index for the U.S., a gauge of how much reports differ from economists’ estimates in Bloomberg surveys, turned negative on April 25 and fell May 3 to the lowest level since September. Last year, the gauge sank below zero for the first time in five months on May 2, the day when the S&P 500 began a 19 percent drop.

Jim Paulsen, chief investment strategist for Wells Capital Management, said he doesn’t expect the market to mirror retreats of 2010 and 2011.

“There is no doubt that the reports have weakened a little bit compared to where they have been,” Paulsen, who helps oversee about $333 billion from Minneapolis, said in a May 3 phone interview. “But I don’t really look at the reports as telling me that we’re failing again.” He sees the S&P 500 advancing to 1,500 this year, a 9.6 percent rise from its current level.

Earnings Season

The benchmark index has more than doubled from a 12-year low in March 2009 as the Federal Reserve announced measures to stimulate the economy and corporate earnings beat estimates. About 70 percent of S&P 500 companies that reported results since the start of the earnings season have topped projections, according to data compiled by Bloomberg.

Energy shares in the S&P 500 slumped 3.3 percent for the week as crude prices fell. Marathon Oil tumbled 9.8 percent to $26.80. The oil producer reported first-quarter earnings excluding some items of 67 cents a share, trailing the average analyst estimate by 23 percent, the most since 2009, according to data compiled by Bloomberg.

Alpha Natural Resources Inc. (ANR:US) slipped 9 percent to $14.45. The second-largest U.S. coal miner cut its forecasts for full- year shipments and capital expenditures after posting a second straight quarterly loss as demand and prices slumped.

Sealed Air, Apple

Sealed Air Corp. (SEE:US) led raw-materials companies in the S&P 500 to a 3.5 percent loss. The packaging manufacturer sank 8.1 percent to $17.69 after earnings missed analysts’ estimates for a third straight quarter.

Apple slumped 6.3 percent to $565.25. The world’s most valuable company has retreated (AAPL:US) 11 percent from its record high on April 9. It is still up 40 percent for the year.

JDS Uniphase dropped 11 percent to $11.09. The maker of fiber-optic testing equipment forecast fiscal fourth-quarter sales of $435 million at most, trailing the average analyst estimate of $458 million in a Bloomberg survey.

Prudential Financial Inc. (PRU:US) tumbled 14 percent, the most in the S&P 500, to $52.89. The second-biggest U.S. life insurer posted a first-quarter loss as the value of the company’s derivative contracts fell.

Losses in Europe

General Motors Co. (GM:US) slid 5 percent to $22.36. The world’s largest automaker said first-quarter profit slid 61 percent on widening losses in Europe.

Green Mountain Coffee Roasters Inc. (GMCR:US) plunged 48 percent, the most ever, to $25.10. The company said profit this year will be less than it previously expected amid the slowest sales growth in five years. It’s seeing more competition from private-label capsules that fit into Keurig machines and from Starbucks Corp., which plans to sell its own single-serve brewer later this year.

Sunoco (SUN:US) jumped 23 percent to $50.23 for the biggest advance since October 2008. The Philadelphia-based refiner agreed to be acquired for $25 in cash and 0.5245 common units of Energy Transfer Partners LP.

-- Editors: Jeff Sutherland, Nick Baker

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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Companies Mentioned

  • MRO
    (Marathon Oil Corp)
    • $39.94 USD
    • -0.29
    • -0.73%
  • AAPL
    (Apple Inc)
    • $98.38 USD
    • -0.64
    • -0.65%
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