The Standard & Poor’s 500 Index (SPX) tumbled to a four-month low on disappointing economic data and concern that credit ratings for Spanish banks would be cut.
Nine out of 10 S&P 500 groups fell amid weaker-than-forecast data on manufacturing in the Philadelphia region and U.S. leading indicators. Caterpillar Inc. (CAT) and JPMorgan Chase & Co. slid at least 4.3 percent to pace losses in the largest companies. Apple Inc. (AAPL) sank 2.9 percent, sending its market value below $500 billion. Facebook Inc. (FB) raised $16 billion in the biggest initial public offering by a technology company in history, pricing shares at the top end of an increased range.
The S&P 500 fell 1.5 percent to 1,304.86 at 4 p.m. New York time. The Dow Jones Industrial Average slid 156.06 points, or 1.2 percent, to 12,442.49. The Nasdaq-100 Index sank 2.1 percent to 2,509.05, falling for an eighth day in the longest slump since 2010. The Russell 2000 Index of small companies slipped 2.3 percent to 754.33. About 8.3 billion shares changed hands on U.S. exchanges, or 24 percent above the three-month average.
“Investors are de-risking,” said Tim Hoyle, the director of research at Radnor, Pennsylvania-based Haverford Trust Co., which manages about $6.5 billion. “They look at a global situation that appears to be degrading, not improving.”
Concern about a world economic slowdown drove the S&P 500 down 3.9 percent in five days. Banco Santander SA was among 16 Spanish banks whose credit ratings were cut by Moody’s Investors Service, which cited economic weakness and the government’s mounting budget strain. The announcement came after the market close, confirming investor speculation.
Both Russia’s Micex Index and Brazil (IBOV)’s Bovespa index fell more than 20 percent from their previous peaks, entering a bear market. The S&P 500 has fallen 8.1 percent from an almost four-year high on April 2. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, soared 10 percent to 24.49, the highest since Dec. 19.
Consumer discretionary, financial and raw material shares had the biggest losses in the S&P 500 among 10 groups. The Morgan Stanley Cyclical Index of companies most-tied to the economy slumped 2.3 percent. The Dow Jones Transportation Average sank 3.2 percent. The KBW Bank Index fell 1.7 percent. A measure of homebuilders in S&P indexes tumbled 6 percent. The Bloomberg U.S. Airlines Index slipped 5.6 percent.
Caterpillar, the world’s largest maker of construction equipment, sank 4.4 percent to $87.80. JPMorgan (JPM) retreated 4.3 percent to $33.93.
Apple lost 2.9 percent to $530.12, sending its market value to $495.7 billion. The company’s market capitalization had topped $500 billion for the first time in February, cementing its lead as the world’s most valuable business and reaching heights not seen by any company since the last recession.
SAC Capital Advisors LP and Viking Global Investors LP were among hedge funds that sold a net 6.1 million shares of Apple last quarter, taking advantage of the 48 percent jump in the iPhone maker’s stock. The stock has fallen 17 percent from its peak in April.
Hedge funds accounted for more than a third of the 15.2 million net Apple shares that were sold by endowments, banks, insurance companies and other investors during the first quarter, according to data compiled by Bloomberg, which was aggregated from regulatory filings. Even so, Apple remains hedge funds’ most valuable holding. As a group they controlled 37.8 million shares as of March 31.
“Apple has always been a hedge-fund favorite,” said Michael Binger, a senior portfolio manager at Gradient Investments LLC in Shoreview, Minnesota, which oversees about $225 million. “You’re seeing some locking in of profits.”
Facebook sold 421.2 million shares at $38 each, a statement today shows. That values the social network at $104.2 billion, making it the largest company to go public in the U.S. by market capitalization, according to data compiled by Bloomberg and Dealogic. Facebook, led by 28-year-old Mark Zuckerberg, this week expanded the IPO to meet demand, allowing investors Goldman Sachs Group Inc. and Accel Partners to reap more gains.
“My feeling is they could have gone higher, but they wanted to leave some room for upside tomorrow,” said Arvind Bhatia, an analyst with Sterne, Agee & Leach Inc. in Dallas. “The demand was obviously quite strong so I think it’s the right move.”
American International Group Inc. (AIG) retreated 6.5 percent, the biggest decline since Oct. 3, to $28.47. The Federal Reserve Bank of New York postponed the sale of assets acquired in the company’s rescue.
Limited Brands Inc. lost 4.4 percent to $45.86. The owner of the Victoria’s Secret lingerie chain forecast earnings for the second quarter and full year that trailed estimates.
Wal-Mart Stores Inc. (WMT) rallied 4.2 percent, the most since 2009, to $61.68. The world’s largest retailer reported first-quarter profit that topped analysts’ estimates as its low prices increased customer traffic and boosted sales.
Sears Holdings Corp. (SHLD) gained 3.1 percent to $52.42. The retailer controlled by Edward Lampert reported first-quarter net income of $189 million after selling stores and said it would partially spin off its Canadian operations.
Gold producers rallied after the precious metal jumped the most since October as speculation that the Federal Reserve will announce more stimulus boosted demand. Newmont Mining Corp. (NEM), the largest U.S. gold producer, added 4 percent to $45.26.
Hewlett-Packard Co. (HPQ) advanced 0.1 percent to $22.06, after falling as much as 1 percent. The company is considering cutting as many as 25,000 jobs, or 8 percent of its work force, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
A long-term peak in the S&P 500 is developing as the gauge diverges from other equity measures, meaning stocks are likely to decline next year, according to RBC Capital Markets.
While the S&P 500 surpassed its 2011 peak last month, other stock measures including the Russell 2000 Index (RTY) of small U.S. companies and the MSCI Emerging Markets Index failed to reach last year’s levels, sending a warning sign, according to a May 15 report from RBC’s Robert Sluymer.
“The MSCI and Russell didn’t confirm the S&P’s new cycle highs,” Sluymer, a technical analyst at RBC in New York, said during a phone interview yesterday. “These are the types of divergences you start to get as market tops develop.”
At the same time, the index may rebound in the next few weeks after reaching its “support band” of 1,300 to 1,330, Sluymer said in the May 15 report.
Cyclical companies are showing no signs of a reversal even though they appear “oversold,” Sluymer said. Caterpillar and Joy Global Inc. (JOY) are two examples of economic-sensitive companies that have shown no evidence of bottoming, he said.
“We’re working through a much bigger top here,” he said in the interview. “We’re already seeing the market rotating away from cyclical leadership towards defensive themes.”
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