U.S. Stocks Drop on Spanish Bond Sale, SanDisk Forecast

April 4 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Deirdre Bolton report on today’s ten most important stocks including IBM, McDonald’s and Gold futures. (Source: Bloomberg)

(Corrects story that moved yesterday to show that GE’s credit rating was cut one step, not two, in 16th paragraph.)

U.S. stocks fell, with the Standard & Poor’s 500 Index posting this year’s second-biggest decline, as demand dropped at a Spanish bond auction and SanDisk (SNDK) Corp.’s lower forecast dragged down technology shares.

Computer and software makers fell 1.4 percent as a group and were the biggest drag on the S&P 500 among 10 industries as SanDisk, the biggest maker of flash-memory cards, tumbled 11 percent. Alcoa Inc. lost 2.5 percent, pacing declines among material companies, as investors sold shares of companies most- tied to the economy after a report on U.S. service industries missed estimates. Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) slumped at least 2.2 percent as financial stocks slid.

The S&P 500 lost 1 percent to close at 1,398.96 at 4 p.m. in New York today, retreating the most since March 6, when the benchmark index plunged 1.5 percent in its worst drop of the year. The Dow Jones Industrial Average slid 124.8 points, or 1 percent, to 13,074.75.

The Spanish auction “serves as a reminder to the market that Europe is still with us,” Mark Freeman, chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a telephone interview. His firm oversees about $13 billion. “We still have a long way to go before things get worked out,” he said. “The market has now moved significantly higher. But guess what, expectations are now much higher. What ultimately it’s going to take is much stronger corporate profits.”

Fed Minutes

The S&P 500 dropped 0.4 percent yesterday as the minutes from the March 13 meeting of the Federal Open Market Committee showed a decreased urgency for further monetary stimulus. The Federal Reserve will refrain from increasing monetary accommodation unless economic expansion falters or prices rise at a rate slower than its 2 percent target. The S&P 500 rallied to its highest level since May 2008 on April 2 after a gauge of U.S. manufacturing climbed more than estimated.

Spain sold 2.59 billion euros ($3.4 billion) of bonds at an auction today, the Bank of Spain said. That was less than the maximum target of 3.5 billion euros. It auctioned 973 million euros of five-year notes at an average yield of 4.32 percent. Investors bid for 2.46 times the amount of debt allotted. That compared with a bid-to-cover ratio of 2.59 at the previous auction of the securities on March 1.

Photographer: Spencer Platt/Getty Images

Traders on the floor of the New York Stock Exchange on April 2, 2012. Close

Traders on the floor of the New York Stock Exchange on April 2, 2012.

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Photographer: Spencer Platt/Getty Images

Traders on the floor of the New York Stock Exchange on April 2, 2012.

Stocks extended losses after the Institute for Supply Management’s non-manufacturing index dropped to 56 from a one- year high of 57.3 in February. Readings above 50 signal expansion, and economists surveyed by Bloomberg News projected 56.8 for the gauge, according to the median estimate.

‘Excuse to Pause’

Companies added 209,000 jobs last month after a revised 230,000 gain in February, figures from ADP Employer Services showed today. The median estimate in the Bloomberg News survey called for a 206,000 increase.

“It doesn’t matter what the news is today, I don’t think it’ll stem a decline,” said Richard Weeks, the Vienna, Virginia-based managing director and partner at HighTower’s VWG Wealth Management. His firm oversees more than $20 billion. “The market is showing signs that it’s ready for a little consolidation. You could make a case that the market is looking for an excuse to pause and digest some of its gains.”

Technology and financial shares in the S&P 500 have risen 21 percent and 20 percent this year respectively, the most among the 10 industry groups.

The S&P 500 Information Technology Index tumbled 1.4 percent today, the biggest decline since Dec. 21. SanDisk sank 11 percent, the most in the S&P 500, to $44.51 after predicting revenue in the quarter that ended April 1 of about $1.2 billion. That compared with an earlier forecast for sales of $1.3 billion to $1.35 billion. Gross margin, a measure of profitability, will be less than the company’s previous prediction of 39 percent to 42 percent, SanDisk said.

Micron, KBW

Micron Technology Inc. (MU), the largest U.S. maker of computer memory, lost 4.1 percent to $7.66.

Investors sold shares of companies most-tied to economic growth, sending raw-material producers to a 1.4 percent drop, the third-biggest loss in the S&P 500. Alcoa Inc., the largest aluminum producer in the U.S., slumped 2.5 percent to $9.81 for the second-biggest retreat in the Dow.

All groups in the S&P 500 except phone companies slumped today. The Morgan Stanley Cyclical Index fell 1.4 percent.

The KBW Bank Index retreated 1.8 percent. Bank of America slumped 3.1 percent to $9.20 while JPMorgan declined 2.2 percent to $44.41.

GE’s Rating

General Electric Co. (GE), the maker of jet engines, power generation equipment, health-care imaging equipment and locomotives, fell 1.1 percent to $19.74. Moody’s Investors Service cut GE’s credit rating by one step and reduced GE Capital Corp. by two steps, citing “heightened risk” from the finance unit.

St. Jude Medical Inc. slipped 4.9 percent to $41.67. The medical-device maker will stop selling the QuickSite and QuickFlex left-ventricular leads, wires that help pace the heart after 39 reports of the wires protruding from their insulation.

WebMD Health Corp. (WBMD) fell 9.4 percent to $23.29, the lowest since April 2009. The medical information company said it will purchase 5.77 million shares, or about 10 percent of outstanding equity, for $26 each.

To contact the reporters on this story: Joseph Ciolli in New York at jciolli@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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