U.S. Stocks Fall as S&P 500 Drops to Lowest Level Since January

U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the lowest level since January, following an increase in jobless claims, a wider American trade deficit and a slowdown in China’s export growth.

Caterpillar Inc. (CAT) and United Technologies Corp. (UTX) slumped at least 2.3 percent, pacing declines among industrial companies. Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) dropped more than 2.9 percent as crude oil declined a third day amid investor concern that fuel demand will slow. General Motors Co. (GM) decreased 2.6 percent after the largest U.S. automaker said Chief Financial Officer Chris Liddell will leave the company next month.

The S&P 500 retreated 1.9 percent to 1,295.11 at 4 p.m. in New York. The Dow Jones Industrial Average decreased 228.48 points, or 1.9 percent, to 11,984.61 for the biggest decline since Aug. 11. The Stoxx Europe 600 Index tumbled 1.2 percent as Spain’s credit rating was downgraded by Moody’s Investors Service. Crude oil fell 1.6 percent to $102.70 a barrel.

“There are so many uncertainties that it’s hard to want to bid up this market,” said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion. “On top of claims popping back up, there’s worsening in the trade deficit at a time when the emerging world is slowing down and the Middle East crisis creates an unpredictable environment for oil. To make matters worse, Spain gets downgraded, which is an indication that the European crisis may be far from being put to bed.”

Middle East Turmoil

The S&P 500 has fallen 3.6 percent from this year’s highest level on Feb. 18 as oil surged 19 percent amid unrest in Libya and the Middle East. The benchmark for U.S. equities has rallied 91 percent from its bear-market low on March 9, 2009, amid government stimulus measures and as corporate earnings beat analysts’ estimates for eight straight quarters.

The benchmark gauge for U.S. equities fell below its average price from the past 50 days, according to data compiled by Bloomberg. The 130 trading days that it remained above that level was the longest since early 2007, according to Bespoke Investment Group.

“Since the 50-day moving average is used by certain momentum-based traders, it would imply lower prices” if the index falls below, said Arthur Huprich, an analyst with Raymond James & Associates Inc. Losses may accelerate should the S&P 500 fall below the Feb. 24 intraday low of 1,294.26, he said.

Jobless Claims Rise

Stock futures fell before the open of exchanges as the Labor Department said applications for first-time unemployment benefits rose by 26,000 to 397,000 in the week ended March 5. Economists forecast claims would climb to 376,000, according to the median estimate in a Bloomberg News survey. Separately, the Commerce Department said the trade deficit in goods and services rose 15 percent to $46.3 billion in January as a surge in imports led by costlier oil overshadowed record exports.

The Bloomberg Consumer Comfort Index dropped to minus 44.5 in the period through March 6 from the prior week’s minus 39.7, which was close to the best level since 2008. Sentiment suffered the most among respondents who lacked a full-time job or any employment and those earning less than $50,000 a year.

The U.S. government, facing a record annual fiscal shortfall and a congressional impasse over financing, posted the largest monthly deficit ever in February, reflecting increased spending. The gap totaled $222.5 billion last month compared with a $220.9 billion shortfall in February 2010, according to the Treasury Department’s monthly budget statement released today in Washington.

China, Spain

Earlier losses in U.S. futures also followed China’s unexpected $7.3 billion trade deficit, the biggest in seven years, buttressing the government’s case against U.S. arguments for faster gains in the yuan. European shares fell as Spain’s rating was cut to Aa2 by Moody’s, which said the cost of shoring up the banking industry will top government estimates.

“There’s just a lot going on,” said Tommy Huie, who oversees about $33 billion as president and chief investment officer of M&I Investment Management in Milwaukee. “I don’t think anyone is willing to commit large positions at this point. Investors will take a wait-and-see approach over the next week or two to rethink their strategy.”

Stocks of companies that are tied to economic growth, including commodity producers and technology firms, posted some of the biggest declines in the S&P 500. The Morgan Stanley Cyclical Index slumped 2.1 percent as 29 of its 30 stocks fell.

Caterpillar, the world’s largest maker of construction equipment, dropped 3.9 percent to $98.39. United Technologies, the maker of Pratt & Whitney jet engines, retreated 2.4 percent to $80.92.

Energy Shares Slump

Energy shares had the biggest decline in the S&P 500 within 10 industries, falling 3.6 percent. Exxon dropped 3.6 percent to $81.38. Chevron retreated 3 percent to $99.08.

General Motors declined 2.6 percent to $31.42. The automaker said Vice Chairman and Chief Financial Officer Chris Liddell will leave the company April 1. Dan Ammann, 38, will succeed Liddell as chief financial officer. Amman had been treasurer and a corporate vice president.

The Bloomberg U.S. Airlines Index of 12 stocks rallied 1.8 percent as concern about higher energy costs eased. JetBlue Airways Corp. (JBLU) gained 4.2 percent to $6. Delta Air Lines Inc. (DAL) advanced 2.8 percent to $11.18.

Green Mountain Coffee Roasters Inc. (GMCR) surged a record 41 percent to $61.71 after agreeing to distribute Starbucks Corp. (SBUX)’s coffee and teas for its single-serve Keurig brewing systems. Starbucks climbed 9.9 percent to $37.97 for the biggest increase in the S&P 500.

H&R Block Rallies

H&R Block Inc. (HRB) advanced 4.3 percent to $15.84. The biggest U.S. tax preparer posted a third-quarter profit of 6 cents a share excluding some items, beating the average analyst estimate of 5 cents, according to Bloomberg data.

The stock market’s retreat from a February peak may be just as short as its dip in November, Dahlman Rose & Co. said. The gauge rebounded at the technical support level on its General Overview Charts both weeks since the 32-month high on Feb. 18, data from Bloomberg and Dahlman Rose show. In November, after the index recovered at the same support level for three weeks, the S&P 500 had its best December return since 1991 and rose for the next two months.

Rick Bensignor, chief market strategist at Dahlman Rose, said the resilience in the stock market may force him to abandon his “overly cautious stance,” including an estimate that the S&P 500 may drop as low as 1,230. Should the S&P 500 close tomorrow at or near this week’s high, the market may be headed for further gains, he said.

“Buying stocks is still en vogue for most, and while sellers are chompin’ at the bit for some solid reason to hit the red button, they haven’t yet found due cause,” Bensignor wrote in a note yesterday. “Should we go out near the highs of the week this Friday, I suspect we need to think that another leg up is coming, and one we’d not want to fight.”

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; 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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