U.S. Stocks Fall as S&P 500 Has Worst Weekly Drop in 2012

U.S. stocks slid this week, giving the Standard & Poor’s 500 Index its biggest decline of the year, after the Federal Reserve signaled it will refrain from further monetary stimulus and concern about Europe intensified.

Nine out of 10 S&P 500 industries retreated during the holiday-shortened week. Energy companies fell the most as Alpha Natural Resources Inc. (ANR) slumped 6.6 percent, leading the group to a 1.8 percent drop. SanDisk Corp. (SNDK) and Constellation Brands Inc. (STZ) tumbled at least 8.4 percent after providing disappointing forecasts. Apple Inc. jumped 5.7 percent, helping drive technology companies in the benchmark index to the longest string of weekly gains since at least 1989.

The S&P 500 fell 0.7 percent for the week to 1,398.08, after reaching the highest level since May 2008 on April 2. The Dow Jones Industrial Average lost 151.90 points, or 1.2 percent, to 13,060.14. While U.S. stocks markets are closed today for Good Friday, futures on the two indexes will trade for 45 minutes after the Labor Department’s monthly jobs report comes out at 8:30 a.m. New York time.

“The Fed is taking QE3 a little bit off the table,” Jeffrey Kleintop, chief market strategist at LPL Financial Corp. in Boston, which oversees $350 billion, said in a telephone interview, referring to a third round of stimulus measures known as quantitative easing. “The market knows how the movie ends. It has seen it twice before and is worried we’re on the cusp of a 15 to 20 percent pullback.”

First Quarter

Equities failed to build on the S&P 500 (SPX)’s best first- quarter rally since 1998. Minutes from the March 13 meeting of the Federal Open Market Committee showed that the central bank will refrain from increasing monetary accommodation unless economic expansion falters or prices rise at a rate slower than its 2 percent target. Concern about Europe’s debt crisis intensified as Spain sold 2.59 billion euros ($3.4 billion) of bonds at an auction, less than the maximum target of 3.5 billion euros.

The S&P 500 surged 12 percent from January through March as data on manufacturing, real estate and the labor market boosted optimism about the world’s largest economy. Reports this week showed manufacturing in the U.S. expanded at a faster pace than forecast while jobless claims dropped to the lowest level in four years. The Labor Department report today is projected by economists to show the nation added more than 200,000 jobs for a fourth straight month.

Energy shares in the S&P 500 declined 1.8 percent for the third consecutive weekly retreat, the longest streak since August. Alpha Natural, a coal producer, fell 6.6 percent to $14.20. Nabors Industries Ltd., the world’s largest land-rig contractor, decreased 5.1 percent to $16.60.

SanDisk Tumbles

SanDisk tumbled 11 percent to $44.09. The biggest maker of flash-memory cards predicted 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. SanDisk cited weaker-than-expected pricing and demand for components that store data in mobile phones.

The S&P 500 Information Technology Index added 0.1 percent, gaining for a 14th straight week, the longest streak since at least September 1989. Apple, the world’s biggest company by market value, advanced 5.7 percent to a record $633.68 after its new iPad was named the best tablet computer in a ranking by Consumer Reports. Analysts (AAPL) from Piper Jaffray Cos. and Topeka Capital Markets said the stock could surge to $1,000.

Constellation Brands slipped 8.4 percent to $21.61. The world’s largest wine company said full-year earnings per share may be $1.93 to $2.03. Analysts projected profit of $2.23, on average, in a Bloomberg survey.

‘Heightened Risk’

General Electric Co. (GE), the maker of jet engines, power generation equipment, health-care imaging equipment and locomotives, fell 2.9 percent to $19.49. Moody’s Investors Service cut GE’s credit rating by one level and reduced GE Capital Corp. by two steps, citing “heightened risk” from the finance unit.

First Solar Inc. (FSLR) fell the most in the S&P 500, sinking 16 percent to $20.98. The biggest maker of thin-film solar panels had its share-price estimate lowered to $20 from $35 by JPMorgan Chase & Co., which said the company’s profit margin will continue to decline.

Avon Products Inc. (AVP) surged 21 percent, the most since 1998, to $23.42. Coty Inc., the seller of perfumes by Heidi Klum and Beyonce Knowles, offered to buy the cosmetics company for about $10 billion. Avon rejected the bid, saying a deal wouldn’t be in the best interests of shareholders.

Bed Bath & Beyond Inc. (BBBY) rose 9.2 percent to $71.85. The retail-chain operator posted a fourth-quarter profit of $1.48 a share, beating the average analyst estimate of $1.32.

Near Zero

Fed Chairman Ben S. Bernanke has kept interest rates near zero since December 2008 and expanded the central bank’s balance sheet with two rounds of asset purchases totaling $2.3 trillion. First-quarter rallies in the S&P 500 stalled in April in both of the past two years, sinking as much as 16 percent in 2010 and 19 percent in 2011, amid concern the Fed would stop stimulating the economy.

“One of the very stated reasons why the Fed has unleashed all this easing through QE1 and QE2 is to attempt to juice the stock market to boost the wealth effect,” Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., told Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.” “Now that it looks like we are not going to get QE3, we are now going through the digestion phase of figuring out how much of the support under the economy or the market was a function of that.”

To contact the reporter on this story: 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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