U.S. stocks fell, driving the market to its first weekly drop since September, as Greece’s reluctance to accept another bailout and a disagreement over boosting the International Monetary Fund’s resources threatened Europe’s efforts to halt its debt crisis.
All 10 groups in the S&P 500 fell this week as financial stocks plunged 5.4 percent. Jefferies Group Inc. (JEF) retreated 18 percent amid concern about its investments in Europe while Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) dropped more than 7.4 percent. Abercrombie & Fitch Co. (ANF) plunged 24 percent, its biggest loss in three years, after the teen-clothing retailer said sales fell at flagship stores in Europe last quarter.
The S&P 500 slid 2.5 percent to 1,253.23, the first weekly decline since the period ended Sept. 30. The benchmark equity index dropped 2.5 percent on Oct. 31, trimming the measure’s biggest monthly rally since 1991 to 11 percent. The Dow Jones Industrial Average (INDU) retreated 247.87 points, or 2 percent, to 11,983.24 this week.
Stocks declined because of “the ping-pong match going on in Greece,” Chris Hyzy, the New York-based chief investment officer at U.S. Trust Co., which oversees about $360 billion, said in telephone interview. “Investors are very concerned about what that means for counterparty risk around the world and then ultimately how that factors into the broader economy and profits.”
Equities plunged worldwide on Oct. 31 and Nov. 1 after Greek Prime Minister George Papandreou scheduled a referendum on the European Union’s expanded rescue plan, spurring concern the deal will unravel. After rallying two straight days, the S&P 500 dropped yesterday when the G-20 disagreed on increasing the IMF’s resources, fueling pessimism European leaders won’t have enough aid to bail out indebted nations. Stocks had rallied throughout October on optimism the crisis would ebb.
After U.S. exchanges closed yesterday, Papandreou won a confidence vote in parliament. He will now attempt to shore up support for an international rescue after Greece’s main opposition party rejected his offer to form a new government.
The S&P 500 lost 0.6 percent yesterday even after the U.S. jobless rate fell to a six-month low of 9 percent. Economists projected the figure would remain at 9.1 percent, according to the median projection in a Bloomberg survey. Payrolls increased by 80,000 in October, missing the economist forecast of 95,000, following gains in the prior two months that were revised up by 102,000, U.S. Labor Department figures showed.
“It’s a seesaw number,” Hyzy said of the payrolls figures. “Revisions being upward have muted the effect of it being below expectations.” He added: “Profits and payrolls are taking the backseat to the third P, which is policy” from governments in the U.S. and Europe.
Per-share earnings beat estimates at about three-quarters of the companies in the S&P 500 that released results since Oct. 11, data compiled by Bloomberg show. Profit grew 16 percent for the group on an 11 percent increase in sales.
The S&P 500 advanced 3.5 percent on Nov. 2 and Nov. 3 after the Federal Reserve said it’s prepared to take action if needed to safeguard the economic recovery and the European Central Bank unexpectedly lowered interest rates.
Financial shares tumbled the most in the S&P 500 this week, losing 5.4 percent, on continued concern about potential losses from Europe.
Jefferies dropped 18 percent to $12.07. Egan-Jones Ratings Co. downgraded the investment bank’s debt, citing large “sovereign obligations” relative to equity. The shares added 0.5 percent yesterday after Jefferies said it will increase disclosure of European holdings to counter investor concern the assets could hobble the firm.
MF Global Holdings Ltd. was delisted from the New York Stock Exchange after the futures brokerage filed for bankruptcy on Oct. 31. The company collapsed after revealing a $6.3 billion bet on Italian, Spanish, Belgian, Portuguese and Irish debt, which led to credit downgrades, margin calls and regulators’ demands to boost capital. Its stock fell 79 percent to 26 cents in over-the-counter trading.
Bank of America fell 12 percent to $6.49 and JPMorgan declined 7.4 percent to $33.97, leading this week’s losses in the Dow average.
Raw-material and energy in the S&P 500 companies declined 2.7 percent and 2.5 percent, respectively. Alcoa Inc. (AA), the largest U.S. aluminum producer, slumped 5.5 percent to $10.93. Exxon Mobil Corp. (XOM), the energy producer that is the world’s most valuable company by market value, lost 3.6 percent to $78.52.
Abercrombie & Fitch had the biggest drop in the S&P 500, falling 24 percent to $58.21. The clothing retailer said it was hurt by a “slowing trend” in Europe and that same-store sales in Japan and Canada continued to decline.
MEMC Electronic Materials Inc. (WFR) fell 22 percent to $5.19. The second-largest U.S. maker of polysilicon lowered its earnings outlook for this year because of an oversupply of the material used in solar panels.
Suntech Power Holdings Co., the biggest maker of silicon- based solar modules, retreated 11 percent to $2.74. It may reduce manufacturing output in the first quarter because of a seasonal dip in demand. First Solar Inc. (FSLR) slumped 8.2 percent to $49.59.
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