U.S. stocks fell for the week, as the Standard & Poor’s 500 Index posted its biggest drop since June, on concern Europe’s debt crisis is worsening and stimulus measures may not be enough to boost economic growth.
The S&P Supercomposite Homebuilding Index (S15HOME) slid 7.3 percent for the first drop in five weeks amid worse-than-expected housing data. Technology stocks and commodity producers led declines as investors sold shares of companies most tied to economic swings. Apple (AAPL:US) Inc. posted its biggest drop since May after the release of its iPhone 5. Caterpillar Inc. (CAT:US) slid 6.2 percent as it cut its earnings forecast (CAT:US).
The S&P 500 erased 1.3 percent to 1,440.67, the biggest weekly slump since June 1. The benchmark index still climbed 2.4 percent in September for the fourth straight monthly gain, and ended the third quarter with a 5.8 percent advance. The Dow Jones Industrial Average (INDU) lost 142.34 points, or 1.1 percent, to 13,437.13 for the week.
“The economy doesn’t have much in the way of momentum,” James Dunigan, who helps oversee $110 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. The Federal Reserve “is doing all it can but it’s really just more of a safety net than any real igniter. They’re trying to awaken animal spirits but they’re not getting very far.”
Data during the week showed the U.S. economy grew 1.3 percent in the second quarter, less than previously estimated, while monthly U.S. business activity unexpectedly contracted for the first time in three years. At the same time, confidence among American consumers rose to a four-month high.
Stocks fell as European leaders clashed on ways to stem the debt crisis. The Bank of Spain said the economy kept falling at a “significant pace” in the third quarter, and the government announced its fifth austerity package in what may be a move to head off tougher conditions demanded as part of a potential European bailout. China’s manufacturers and retailers are less optimistic about sales than they were three months ago and are cutting jobs, according to a survey.
Equities also slumped as Charles Plosser, president of the Philadelphia Fed, said in a Sept. 25 speech that the stimulus program announced this month probably won’t boost growth or hiring and may jeopardize the central bank’s credibility. The S&P 500 reached an almost five-year high on Sept. 14 after the Fed unveiled another round of quantitative easing and the European Central Bank announced an unlimited bond-buying plan.
The equity index has advanced since June 1 amid optimism central banks around the world will take steps to stimulate the economy. It is 8.6 percent from its all-time record set in October 2007.
“The major push in September was from the ECB and the idea that the euro zone will survive,” Brian Jacobsen, who helps oversee about $209 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by e-mail. “There’s the prospect of fiscal stimulus from China, which will likely come in dribs and drabs until the changeover in leadership,” he said. “All of this conspires to push stocks higher.”
Nine out of 10 groups in the S&P 500 fell for the week, with companies most tied to economic growth posting the biggest declines. The Morgan Stanley Cyclical Index (CYC) dropped for the second week, falling 3 percent.
The S&P Supercomposite Homebuilders Index lost 7.3 percent for its first weekly drop since Aug. 24. Purchases of new U.S. homes declined 0.3 percent in August to a 373,000 annual pace, compared with economists’ estimates for a rise to 380,000. Americans also signed fewer contracts than forecast to purchase previously owned homes in August.
All 11 stocks in the gauge fell. PulteGroup Inc. (PHM:US), the largest U.S. homebuilders, declined 8.7 percent to $15.50. Toll Brothers Inc. (TOL:US), the biggest luxury-home builder in the U.S., slumped 8.8 percent to $33.23.
Material and energy stocks declined 1.9 percent and 1.5 percent, respectively. Caterpillar slid 6.2 percent, the most since May 18, to $86.04 as the world’s biggest construction and mining equipment maker cut its forecast for 2015 earnings after commodity producers reduced capital expenditure.
“We’ve seen a slowing in economic growth that was more than we expected,” Chairman and Chief Executive Officer Doug Oberhelman said in a presentation to analysts at the MINExpo industry conference in Las Vegas. “We think ’13 could look like 2012 in terms of worldwide economic growth.”
Technology companies slumped the most among the 10 groups, retreating 2.4 percent. Apple, the world’s most valuable company, fell 4.7 percent to $667.11 for its biggest drop since May 18 and first weekly slump since July.
Debut weekend sales for Apple’s iPhone 5 fell short of some analysts’ estimates after supply constraints delayed shipments. Later in the week, Chief Executive Officer Tim Cook apologized for Apple’s new iPhone mapping application, which replaced Google Inc. (GOOG:US)’s software and has been criticized for flaws such as misrouted directions and inaccurately located landmarks.
Google rallied for an 11th straight week. The shares gained 2.8 percent to $754.50 and touched a record $756.50 during the week.
Jabil Circuit Inc. (JBL:US), a supplier for Apple, plunged 13 percent to $18.72. The company reported profit (JBL:US) excluding some costs was 54 cents a share in the fourth quarter, trailing the analysts (SPLS:US)’ average estimate by 4 cents, data compiled by Bloomberg show, a sign that higher spending to manufacture casings for Apple’s iPhone 5 is crimping margins.
Staples Inc. slumped 6.8 percent to $11.52. Analysts at Credit Suisse Group AG and Citigroup Inc. said the largest U.S. office-supply chain’s plan to revive profits that included closing 60 stores this year was not sufficient.
“While it would be unfair to characterize Staples’ announced moves this morning as simply moving deck chairs on the Titanic, they were not as impactful or far reaching as we and others were hoping,” Credit Suisse’s Gary Balter wrote in a Sept. 25 note.
Accenture Plc (ACN:US), the world’s second-largest technology consulting company, rose 7.3 percent for the biggest gain in the S&P 500 to a record (ACN:US) $70.03 after forecasting full-year earnings topping analysts’ estimates amid a gain in outsourcing bookings.
First Solar Inc. (FSLR:US) rallied 4.5 percent to $22.15 for the third-largest advance in the S&P 500. The world’s biggest maker of thin-film panels may win a contract to supply NextEra Energy Inc. for what would be the world’s biggest solar farm. NextEra is considering thin-film cadmium telluride solar panels as one possible technology for its 1,000-megawatt Blythe project in southern California, according to a document filed with the California Energy Commission on Sept. 24.
Home Depot Inc. (HD:US) jumped 1.6 percent to $60.37, the highest level since April 2000. Shares of the largest U.S. home- improvement retailer have surged 44 percent this year amid signs of recovery in the U.S. housing market.
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