Indexes slumped Thursday after a surprising drop in a service-sector gauge. The market's focus Friday: the U.S. jobs report for November
By Mary Childs
Dec. 3 (Bloomberg) -- U.S. stocks declined, breaking a three-day winning streak for the Standard & Poor's 500 Index, after an unexpected contraction in service industries spurred concern about the economic recovery a day before the government's November jobs report.
Financial institutions led the retreat in the S&P 500 as Bank of America Corp. (BAC) prepared to sell more than $18 billion in equity to repay government bailout funds. American Express Co. (AXP) lost 5.3 percent after the Institute for Supply Management's index of non-manufacturing businesses missed the median economist estimate. Abercrombie & Fitch Co. (ANF) led retailers lower after reporting a decrease in November sales.
The S&P 500 retreated 0.8 percent to 1,099.92 at 4 p.m. in New York after climbing as much as 0.7 percent. The Dow Jones Industrial Average slumped 86.53 points, or 0.8 percent, to 10,366.15.
"It's a fragile recovery," said Mirko Mikelic, who helps manage $19 billion at Fifth Third Asset Management in Grand Rapids, Michigan. "All the jobs we lost at the beginning of this recession may not be recovered till 2012, 2013, so it's going to be longer versus in the past."
Stocks rose at the start of trading after Bank of America, the nation's biggest lender, agreed to repay $45 billion to the government. The S&P 500 also advanced after the Labor Department said the number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week to the lowest level in more than a year.
A private report on payrolls suggests the nation's unemployment rate "might tick upward" when the number is reported tomorrow, White House press secretary Robert Gibbs said today. Gibbs cited a report from ADP Employer Services yesterday that companies in the U.S. cut more jobs than forecast in November. Gibbs said he hasn't seen the Labor Department data and doesn't know what the report will show.
Economists project the jobless rate will remain at a 26- year high of 10.2 percent, according to the median estimate in a Bloomberg survey.
Banks, brokerages and the rest of the financial industry in the S&P 500 lost 2.1 percent as a group, the most among 10 groups. Citigroup Inc. fell 1.2 percent to $4.05. Goldman Sachs Group Inc. (GS) slumped 1.4 percent to $164.30.
Bank of America added 0.7 percent to $15.76. Its plan to repurchase the stake sold to the Troubled Asset Relief Program may boost investor confidence in the lender's health and its chances of finding a new chief executive officer.
Less Government Involvement
"The less involvement financial institutions have with governments the better," said John Haynes, a U.S. equity strategist at Rensburg Sheppards Plc in London. "Clearly Bank of America shareholders would agree."
American Express, the biggest credit-card issuer by purchases, fell 5.3 percent to $38.87 for the largest drop in the Dow average. The ISM's index of non-manufacturing businesses that make up almost 90 percent of the economy fell to 48.7 from 50.6 in October, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction. The median economist estimate was 51.5.
Retailers including Abercrombie & Fitch and Macy's Inc. (M) declined after reporting a drop in business last month as discounts failed to persuade shoppers to increase their spending on holiday gifts.
Abercrombie & Fitch lost 9.3 percent to $36.21. Macy's slumped 3 percent to $15.81. The S&P Retailing Index declined 1.2 percent.
To contact the reporter on this story: Mary Childs in New York at email@example.com