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U.S. Stocks Fall, S&P 500 Posts Second Straight Week of Losses

U.S. stocks declined, giving the Standard & Poor’s 500 Index a second straight weekly loss, as concern over Europe’s debt crisis deepened and inflation reports spurred speculation global interest rates will rise.

Citigroup Inc. (C), the most-traded U.S. stock in 2011, led financial shares in the S&P 500 to the biggest drop among 10 industries, falling 8.1 percent after a 1-for-10 reverse split. Cliffs Natural Resources Inc. (CLF) and Freeport-McMoRan Copper & Gold Inc. (FCX) slumped at least 3.7 percent as data from China increased expectations for higher interest rates. Boston Scientific Corp. (BSX) plunged 11 percent, more than any other S&P 500 company, after saying its chief executive officer will retire.

The S&P 500 lost 0.2 percent to 1,337.77 this week, including the biggest one-day decline since March. The Dow Jones Industrial Average fell 42.99 points, or 0.3 percent, to 12,595.75. The Dow fell during the first two weeks of a month for the first time since July 2009.

“It’s a very volatile period,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, which manages $1.5 billion. “We’re driven by the statistic of the day now that earnings season is over, and even when it’s positive, it may not be as positive as expected. I wouldn’t be surprised if the market stays flat for a while.”

The S&P 500 has advanced 6.4 percent in 2011 after 72 percent of its companies that reported first-quarter results since April 11 topped the average analyst earnings projection. The index had fallen to 1,256.88 on March 16, below the measure’s Dec. 31 level, amid concern that Japan’s earthquake and tsunami would curb global demand.

Oil Falls

Oil fell below $100 a barrel this week, down from its intraday high of $114.83 this month. Raw-material companies in the S&P 500 had the second-biggest drop behind financials this week, as data showed inflation in China stayed above the government’s target, stoking concern about further monetary tightening that may curb demand. Chinese inflation remained higher than 5 percent in April and lending exceeded analysts’ estimates.

Cliffs Natural Resources, an iron-ore producer, slipped the most in a group of 30 materials companies in the S&P 500, falling 5.1 percent. Freeport-McMoRan lost 3.8 percent, adding to its 8.8 percent decline the week before.

Energy stocks in the S&P 500 slid 1.4 percent. Peabody Energy Corp. (BTU), a coal producer, lost about 6 percent to $58.45 after falling four straight days. Tesoro Corp. (TSO), Consol Energy Inc. (CNX) and Massey Energy Co. (MEE) all slumped at least 3.7 percent.

Citigroup, JPMorgan

Citigroup lost 8.1 percent to $41.53, the biggest weekly slump since May 2010. The bank accounted for 6 percent of U.S. trading this year through last week, Bloomberg data show. Financial shares in the S&P 500 declined 2.1 percent for the biggest drop since February. JPMorgan Chase & Co. (JPM) lost the most in the Dow, retreating 4.2 percent to $43.15.

H&R Block Inc. (HRB) fell 8.2 percent to $15.82. Mortgage-bond holders are organizing to force repurchases of soured loans by H&R Block’s Option One Mortgage Corp. unit, according to a Dallas lawyer who is helping coordinate the effort.

The S&P 500 has climbed 28 percent since Federal Reserve Chairman Ben S. Bernanke signaled in August that he would buy more bonds to stimulate the economy. The Fed’s second program of quantitative easing, or QE2, which was officially announced in November, ends in June. With earnings season over, investors are more focused on how the end of the bond-buying program will affect equities, said Tuz.

Grantham, Mayo, Van Otterloo & Co.’s Jeremy Grantham said he’s growing more bearish on U.S. stocks.

‘Lighten Up’

“Lighten up on risk-taking,” Grantham, the chief investment strategist for Boston-based Grantham Mayo Van Otterloo & Co., which manages more than $108 billion, wrote in a report this week. The S&P 500 “may still get to 1,500 before October, but I doubt it, especially without a QE3,” he wrote. “And whether it will reach 1,500 or not, the environment has simply become too risky.”

Boston Scientific lost 11 percent, the most since October 2009. The second-biggest maker of implanted heart devices said Ray Elliott will retire as CEO at the end of 2011. Elliott, 61, served as president and CEO for less than two years and presided over a period of stagnant revenue as demand waned for the company’s heart stents and pacemakers. He said in February that 2011 would be a “difficult” year for Boston Scientific as economic pressures continued to curb sales.

Yahoo! Inc. fell five straight days as signs of tension with Alibaba Group Holding Ltd. raised speculation it may benefit less from part ownership of China’s largest e-commerce provider. The shares lost 11 percent to $16.55.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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

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