U.S. Stocks Fall, Extending Biggest Quarterly Drop Since 2008

U.S. stocks fell, sending the Standard & Poor’s 500 Index to its biggest quarterly drop since 2008, after reports from China and Germany fueled concerns the global economy is slowing.

All 10 groups in the S&P 500 slumped as companies most-tied to economic growth had the biggest declines. Alcoa Inc. fell 4.9 percent, while General Electric Co. (GE) lost 4 percent. Micron Technology Inc. (MU) slid 14 percent for the biggest drop in the S&P 500 after reporting an unexpected loss on weak demand for personal computers. Ingersoll-Rand Plc (IR) retreated 12 percent after lowering its profit forecast.

The S&P 500 retreated 2.5 percent to 1,131.42 at 4 p.m. New York time, wiping out its weekly advance as the index extended losses in the last hour of trading. The Dow Jones Industrial Average lost 240.6 points, or 2.2 percent, to 10,913.38 today, while climbing 1.3 percent for the week.

“It’s an accumulation of worries that keep dragging the market down,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “The economic news continues to be mixed and there’s still worry about the European debt situation and concern about our own political impasse in Washington.” He said, “News like that definitely rings alarm bells for people and makes them more cautious about equities.”

The S&P 500 yesterday rose 0.8 percent as lower-than- estimated claims for unemployment benefits helped offset losses in consumer and technology shares. The index dropped for five consecutive months, the longest falling streak since March 2008. The U.S. equity gauge tumbled 14 percent this quarter, the biggest three-month drop since December 2008, and is down 10 percent for the year.

Global Recession

Investors dumped equities in the third quarter as concern increased that Europe’s debt crisis will trigger a global recession and the Federal Reserve said there are “significant downside risks” to the U.S. economy. The S&P 500 slumped as much as 18 percent from its high in April, as European finance chiefs clashed over how to assist Greece and American lawmakers struggled to agree on raising the federal government’s debt limit. The benchmark equity index fell to a low of 1,119.46 on Aug. 8 after S&P cut the country’s credit rating.

“The U.S. economy is tipping into a new recession,” said the Economic Cycle Research Institute’s Lakshman Achuthan, citing leading indicators. “You have wildfire among the leading indicators across the board. Non-financial services plunging, manufacturing plunging, exports plunging. That is such a deadly combination,” Achuthan, the group’s chief operations officer in New York, said in a radio interview today on “Bloomberg Surveillance.”

Equities fell today as a report showed consumer spending in the U.S. slowed last month. Purchases rose 0.2 percent after a revised 0.7 percent gain in July. Incomes fell 0.1 percent, missing economists’ projection of a 0.1 percent increase.

Consumer Confidence

Stocks pared declines as confidence among U.S. consumers rose in September from the lowest level since November 2008. The University of Michigan’s consumer confidence index for the month was 59.4, up from a preliminary reading issued two weeks ago of 57.8 and from 55.7 in August. The Institute for Supply Management-Chicago Inc.’s business barometer rose to 60.4 this month from 56.5 in August.

“It seems like cautious trading right now with few new longs or shorts on quarter end,” Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc. in Boston, wrote in an e- mail. “We saw two reports, the Michigan confidence report and the Chicago PMI, come in better than both estimates and previous month’s reading. This helped slow the bleeding but it does feel like a nervous market.”

GE, Halliburton

Industrial, commodity and financial companies lost at least 3.2 percent each for the biggest drops among 10 S&P 500 groups. Alcoa fell 4.9 percent to $9.57. General Electric lost 4 percent to $15.22. Halliburton Co. dropped 5.4 percent to $30.52, after the price of oil capped its biggest quarterly loss since the 2008 financial crisis.

American Express Co. (AXP) fell 3.9 percent to $44.90. JPMorgan Chase & Co. (JPM) declined 4.1 percent to $30.12. Financial companies in the S&P 500 have sunk 23 percent this quarter.

Global equities fell today after a report showed a gauge of Chinese manufacturing shrank for a third month, the longest contraction since 2009, as measures of new orders and export demand declined. The reading of 49.9 for the September purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics today, was unchanged from August and compared with a preliminary 49.4 figure published last week.

German Sales

In Germany, retail sales declined the most in more than four years in August as concerns about the economic impact of Europe’s sovereign debt crisis sapped consumers’ willingness to spend. European inflation unexpectedly accelerated to the fastest in almost three years. The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August.

“Investors are hypersensitive to any data at the moment,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $350 billion, said in a telephone interview. “Ordinary announcements have heightened significance in an environment where investors are watching for potential shifts in the trajectories of the domestic and global economies.”

Two industries that have beaten the S&P 500 in the third quarter, computer and software makers as well as companies reliant on discretionary consumer spending, had the biggest declines yesterday and extended losses today. The S&P 500 Information Technology Index lost 2.8 percent, bringing its three-day drop to 4.6 percent. Discretionary companies erased 2.8 percent and fell 5.3 percent in the last three days.

Ingersoll, Micron

Micron Technology slid 14 percent to $5.04, the biggest loss in the S&P 500. The largest U.S. maker of computer-memory chips reported an unexpected loss of 14 cents a share for the fourth quarter on weak demand for personal computers. Analysts projected a profit of 2 cents a share, according to data compiled by Bloomberg.

Ingersoll-Rand declined 12 percent to $28.09, the third- biggest drop in the S&P 500. The company that makes products such as Club Car golf cars and Schlage locks forecast third- quarter earnings to be no more than 80 cents a share, below an earlier prediction of at least 85 cents and missing the average analyst estimate of 92 cents.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

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

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