U.S. stocks retreated, following the longest rally since July for the Standard & Poor’s 500 Index, amid concern Greece will fail to qualify for more financial aid needed to avoid a debt default.
Stocks pared losses in the final hour of trading as Greece said discussions with European officials about the country’s bailout were productive. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) slid at least 2.8 percent, following a slump in European lenders. Alcoa Inc. (AA) sank 3.3 percent, pacing declines in commodity producers. Hewlett-Packard Co. (HPQ) dropped 2.6 percent as companies most-dependent on economic growth tumbled.
The S&P 500 lost 1 percent to 1,204.09 at 4 p.m. New York time, paring a decline of 2.3 percent. It rallied five straight days last week as government officials and central bankers took steps to ease Europe’s debt crisis. The Dow Jones Industrial Average fell 108.08 points, or 0.9 percent, to 11,401.01.
“The only story that matters is Europe,” Jack Ablin, chief investment officer for Chicago-based Harris Private Bank, which oversees $55 billion, said in a telephone interview. “Central banks can provide liquidity, but they can’t solve structural imbalances,” he said. “I have an uncomfortable level of cash, but there are very few tranquil places to hide.”
Index futures declined after the close. Italy had its long- and short-term sovereign credit ratings cut to A/A-1 from A+/A- 1+ by S&P. The December contract on the S&P 500 slipped 0.6 percent to 1,190.8 at 6:31 p.m. in New York.
The S&P 500 has lost as much as 18 percent since April 29 on concern Europe’s crisis would threaten the global economy. The gauge rose 5.4 percent last week, the third-biggest rally since 2009, after central bankers said they would provide dollar loans for European lenders and French President Nicolas Sarkozy and German Chancellor Angela Merkel said they’re convinced Greece will remain in the euro area.
Prime Minister George Papandreou’s government will hold another call with its main creditors tomorrow after a “productive” round of talks aimed at staving off default.
Finance Minister Evangelos Venizelos held “substantive” discussions with European Union and International Monetary Fund officials about securing a sixth installment of rescue funds, the Athens-based finance ministry said in an e-mailed statement after a teleconference. A second call will be held tomorrow.
As Papandreou fights investor doubts and domestic opposition, European leaders are squabbling over the terms of the July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. U.S. Treasury Secretary Timothy F. Geithner said in an interview today that Europe will eventually adopt some of the same measures the U.S. took after the 2008 financial crisis.
“The markets are saying the odds are very high of a Greek default,” Frederic Dickson, who helps oversee $28 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon, said in a telephone interview. “In addition, people are expecting a lot from the Fed this week,” which leaves room for disappointment, he said.
Federal Reserve officials may propose new measures to galvanize the economy when the Federal Open Market Committee completes a two-day meeting on Sept. 21. Ben S. Bernanke, the central bank’s chairman, told economists Sept. 8 in Minneapolis that policy makers have measures at hand and are “prepared to employ these tools as appropriate.”
Stocks maintained losses after data showed confidence among U.S. homebuilders sank to a three-month low in September as prospective buyer traffic, sales and purchase expectations fell.
Financial shares had the biggest decline in the S&P 500 within 10 industries, falling 2.7 percent as a group. Bank of America, the biggest U.S. lender by assets, slumped 3.3 percent to $6.99. JPMorgan retreated 2.8 percent to $32.49.
Life insurers retreated after Wells Fargo & Co. (WFC) lowered its earnings estimates for the industry, citing a drop in equity prices during the third quarter. MetLife Inc. (MET) slid 4.6 percent to $31.51.
Commodity producers decreased amid concern of slower demand for energy and raw materials. Alcoa sank 3.3 percent to $11.58. Exxon Mobil Corp. (XOM) declined 1.1 percent to $73.70.
The Morgan Stanley Cyclical Index of companies most-tied to the economy lost 1.6 percent. The Dow Jones Transportation Average, a proxy for economic growth, dropped 1.7 percent. Hewlett-Packard, the world’s largest computer maker, slumped 2.6 percent to $22.91.
Tyco International Ltd. (TYC) rose 2.4 percent to $44.75 as it plans to break itself into three publicly traded companies. The separation will create standalone companies from ADT’s North American residential security, flow-control and the world’s biggest commercial security and fire-systems division.
Goodrich Corp. (GR), the aerospace-equipment maker said to be in talks on a takeover by United Technologies Corp., climbed 16 percent to $107.60, the highest level since 1980. A deal with United Technologies may be announced as soon as this week, said one of three people familiar with the matter, who weren’t authorized to speak publicly.
John Moran, a spokesman for United Technologies, declined to comment. Goodrich’s Andrew Martin didn’t immediately respond to a voice mail and e-mail request for comment about the takeover talks.
Citigroup Inc. (C)’s Tobias Levkovich cut his year-end forecast for the S&P 500 to 1,325 from 1,400, citing disappointing global economic data and constraints on investor confidence. The chief U.S. equity strategist at the New York-based firm forecast the S&P 500 would rise 3.8 percent in 2012 to 1,375.
“While the S&P 500’s potential gains still look quite attractive over the next six and 12 months, the investment community may not be as willing to bump up share prices that vigorously,” he wrote in a note dated Sept. 16.
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