Markets & Finance

Stocks Tumble on Job, Debt Worries


U.S. stocks dropped the most since April 2009 on disappointing earnings, rising jobless claims, and concern over sovereign debt

By Nikolaj Gammeltoft

(Bloomberg) — U.S. stocks dropped, sending the Standard & Poor's 500 Index down the most since April, on disappointing earnings, an unexpected increase in jobless claims and growing concern that Greece, Spain and Portugal will struggle to curb their budget deficits.

Bank of America Corp. and Alcoa Inc. lost more than 4 percent to lead losses in 29 of 30 Dow Jones Industrial Average stocks. MasterCard Inc., Kellogg Co. and Monster Worldwide Inc. fell after results trailed analyst estimates. Exxon Mobil Corp. slumped 2.8 percent as crude oil tumbled the most in six months. Freeport-McMoRan Copper & Gold Inc. helped drive raw-materials producers lower as metal prices slid.

The S&P 500 decreased 3.1 percent to 1,063.11 at 4 p.m. in New York, with its 10 industries retreating at least 2.3 percent. The Dow average dropped 268.37 points, or 2.6 percent, to 10,002.18. The MSCI World Index of equities in 23 developed nations slumped 2.8 percent. All three measures sank to the lowest levels since November.

“People are very nervous about the European debt issues and the U.S. recovery,” said Ryan Bend, a money manager at Federated Investors' Prudent Bear Fund, which manages about $1.6 billion. “Companies are reporting decent earnings, but investors are still selling. I would be cautious to own some of these stocks because there are a lot of sellers in the market.”

Only 11 stocks in the S&P 500 and 1 company in the Dow—Cisco Systems Inc.—advanced today as the jump in unemployment claims spurred concern that forecasts for growth in jobs may prove to be too optimistic. The median estimate in a Bloomberg survey of economists is for an increase in 15,000 jobs when the government releases its monthly labor-market report tomorrow.

Among companies listed at the New York Stock Exchange, 24 fell for each that rose, the broadest drop since January 2009.

Emergency Measures

Portugal and Greece led a surge in the cost of insuring sovereign debt from default. The European Central Bank left its benchmark interest rate at 1 percent, a record low, and will probably hold off unwinding any more emergency lending measures on concern about national deficits and rising unemployment.

The S&P 500 lost 3.7 percent last month as concern over sovereign debt grew, China stepped up measures to curb lending and U.S. President Barack Obama proposed rules to rein in risk-taking at banks.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged 21 percent to 26.08 on demand for protection against further losses. The benchmark index for U.S. stock options measures the cost of using options contracts as insurance against declines in the S&P 500.

“The jobless claims number was definitely disappointing,” said Cliff Remily, a portfolio manager at Santa Fe, New Mexico-based Thornburg Investment, which oversees $53 billion. “Investors are skittish. They've been looking towards a recovery in 2010 which may not be as strong as expected.”

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.


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