S&P 500 Falls Most in One Month Amid Concern Over Europe

U.S. stocks fell, as the Standard & Poor’s 500 Index posted its biggest decline in a month, amid investor concern that European leaders aren’t making progress in solving the region’s debt crisis.

Hewlett-Packard Co. (HPQ) dropped 8.2 percent after forecasting full-year earnings that missed analysts’ estimates as demand slumped. Big Lots Inc. (BIG) tumbled 21 percent after lowering its annual earnings projection. Boeing Co. retreated 3.4 percent after losing 35 orders for 787-9 planes, the biggest Dreamliner cancellation. Alcoa Inc. (AA) erased 2.7 percent, pacing declines among raw-material stocks.

The S&P 500 (SPX) slumped 0.8 percent to 1,402.08 at 4 p.m. in New York. The benchmark index for American equities is heading for its first weekly decline in almost two months, with a four- day drop of 1.1 percent. The Dow Jones Industrial Average lost 115.3 points, or 0.9 percent, to 13,057.46 today. Volume for exchange-listed stocks in the U.S. was 5.3 billion shares, 16 percent below the three-month average.

“We’re tipping over into a corrective phase in stocks,” Barry James, who helps oversee $3.3 billion as president of James Investment Research in Xenia, Ohio, said in a telephone interview. “Europe is the key driver in the world right now. European leaders aren’t really addressing the root problems.”

German Chancellor Angela Merkel said Europe is in one of its deepest crises, and while the path to a solution is “arduous,” the euro region will emerge stronger. She hosted French President Francois Hollande today as the leaders of Europe’s two biggest economies seek common ground on Greece and the wider debt crisis. Greece’s prime minister, Antonis Samaras, will follow Hollande to Berlin tomorrow and travel on to Paris on Aug. 25.

Aid Program

Stocks extended declines after the European Union said it is focused on its aid program for Spain’s banks and hasn’t received a request for a full bailout from the euro-area nation. Earlier, German Finance Minister Wolfgang Schaeuble said that allowing Greece more time to meet its debt obligations would not solve the country’s problems and would increase costs for creditors.

“People aren’t willing to invest,” Stephen Hammers, the chief investment officer at Brentwood, Tennessee-based Compass EMP Funds, which manages about $1 billion in assets, said in a telephone interview. “If Europe gets worse, U.S. investors will see that as a warning sign.”

Investors also watched for signs of future monetary policy. The S&P 500 has rallied 9.7 percent since June 1 on speculation global central banks will take action to stimulate growth. U.S. stocks erased losses yesterday as minutes from the Federal Open Market Committee’s last meeting showed many members judged that more stimulus “would likely be warranted fairly soon.”

Stimulus Debate

James Bullard, the Fed Bank of St. Louis President, said today on CNBC the minutes of this month’s meeting were no longer as relevant because the U.S. economy has picked up in the past month. Earlier, Fed Bank of Chicago President Charles Evans said in Beijing that easing policies would support economic growth around the world, including in China, broadening his call for more stimulus in the U.S.

Purchases of new U.S. homes rose more than projected in July. Sales climbed 3.6 percent to a 372,000 annual pace, compared with the median estimate of 365,000. A separate report showed the number of applications for unemployment benefits climbed last week to a one-month high, showing little progress in the labor market. Jobless claims rose for a second week to reach 372,000. The median forecast called for 365,000.

China Manufacturing

A Chinese report today indicated that manufacturing will contract at a faster pace in August, signaling the country’s economy needs more stimulus to secure a rebound in growth. The preliminary reading for a purchasing managers’ index for China was 47.8. If confirmed, it would be the weakest level since November and the 10th month that the reading has stayed below 50, the longest run in the index’s eight-year history.

Companies most tied to economic growth posted declines. The Morgan Stanley Cyclical Index (CYC) fell for the fourth straight day, losing 1.2 percent for the biggest drop in a month. The Dow Jones Transportation Average, a gauge of 20 shipping companies from FedEx Corp. (FDX) to Southwest Airlines Co. (LUV), tumbled 1 percent for the biggest retreat since Aug. 1. The KBW Bank Index (BKX), made up of 24 lenders, slid 1.1 percent.

Hewlett-Packard, the biggest maker of personal computers, dropped 8.2 percent to $17.64 for the biggest decline in a year. Profit excluding some costs will be $4.05 to $4.07 a share in the year that ends in October, Palo Alto, California-based Hewlett-Packard said yesterday in a statement. That’s at the low end of a forecast for $4.05 to $4.10 issued in May and below the average $4.08 analyst estimate compiled by Bloomberg.

Slumping Demand

The company suffered another quarter of slumping demand for personal computers and services aimed at businesses, underscoring the turnaround challenge facing Chief Executive Officer Meg Whitman.

Other technology stocks also declined. Intel Corp. (INTC), the world’s largest chipmaker, slid 2.7 percent to $25.04, while Microsoft Corp. (MSFT), the biggest software maker, slumped 0.9 percent to $30.26.

Big Lots, the Columbus, Ohio-based discount retailer, plunged 21 percent to $30.76 for the biggest drop in the S&P 500. Profit excluding some items will decline to $2.80 to $2.95 a share this year, reduced from a previous projection of $3.25 to $3.40 a share. Analysts anticipated $3.30, the average of 16 estimates compiled by Bloomberg.

Boeing slumped 3.4 percent to $70.36, after losing 35 orders for 787-9 planes, the biggest Dreamliner cancellation, as Qantas Airways Ltd. scrapped a contract after delivery delays and losses on international routes. Qantas’s pullback on jets worth about $8.5 billion at current list prices reduced Chicago- based Boeing (BA)’s backlog for the 787-9 by about 10 percent.

Alcoa, DuPont

Raw-material stocks fell 1.7 percent for the biggest drop out of 10 groups in the S&P 500. Alcoa, the largest aluminum producer in the U.S., erased 2.7 percent to $8.63, while DuPont Co., the most valuable U.S. chemicals producer, lost 1.1 percent to $50.24.

Patterson Cos. tumbled 4.9 percent to $34.15. The St. Paul, Minnesota-based maker of medical devices for dental and veterinary clinics reported first-quarter earnings of 45 cents a share, missing the average analyst estimate by 4 cents.

Guess? Inc. (GES), an apparel maker that operates 511 stores in the U.S. and Canada, sank 23 percent to $25.95 after cutting its annual profit and revenue forecasts amid a drop in North American store sales. Comparable-store sales, a measure of a retailer’s growth that excludes new stores, fell 8.5 percent in the quarter ended July 28.

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

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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