U.S. Stocks Fall as Economic Reports Fuel Growth Concern

U.S. stocks retreated, trimming the third straight monthly advance for the benchmark Standard & Poor’s 500 Index, amid concern about a worsening of Europe’s debt crisis and of a further slowdown of the global economy.

Sears Holdings Corp. (SHLD) slumped 7.9 percent as the retailer will be replaced in the S&P 500 by chemical maker LyondellBasell Industries NV. (LYB) Ciena Corp. (CIEN), a maker of communications-network equipment, tumbled 20 percent after reporting a wider-than- projected loss and forecasting lower revenue than analysts had estimated. Gap (GPS) Inc. rose 2.7 percent as sales beat estimates.

The S&P 500 declined 0.8 percent to 1,399.48 at 4 p.m. New York time, trimming its monthly advance to 1.5 percent. The Dow Jones Industrial Average retreated 106.77 points, or 0.8 percent, to 13,000.71 today. Volume for exchange-listed stocks in the U.S. was 4.5 billion shares, near the lowest level since at least 2008 excluding days surrounding holidays.

“The main focus is the softer news overseas,” said Michael Strauss, who helps oversee about $26 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “There’s more of a reality check of Europe. Clearly the numbers in the U.S. have gotten a bit better.”

Equities slumped as data showed that economic confidence in the euro area and Japan’s retail sales fell more than economists forecast, while South Korean manufacturers’ confidence stayed near the lowest level since the global financial crisis. Spain will delay deciding whether to seek a sovereign bailout until the aid conditions are clear, Prime Minister Mariano Rajoysaid following a meeting with French President Francois Hollande.

U.S. Data

In the U.S., more Americans than forecast filed applications for unemployment benefits last week, a sign that progress in the labor market is faltering amid a slowing economy. Consumer spending climbed in July for the first time in three months as the biggest part of the economy struggled to overcome a jobless rate hovering over 8 percent.

Federal Reserve Chairman Ben S. Bernanke is scheduled to speak tomorrow in Jackson Hole, Wyoming, where he may discuss the economic outlook. Policy makers have said they are prepared to provide new stimulus “fairly soon” unless there is evidence of “substantial and sustainable” improvement in the recovery, according to minutes of the Federal Open Market Committee’s July 31-Aug. 1 meeting. Policy makers are set to meet in September.

Sears fell 7.9 percent to $52.90. S&P said the company has too few shares available for trading to be representative of U.S. companies. The retailer has 106.5 million shares outstanding and 36.1 million shares that can be traded, based on data compiled by Bloomberg. It is controlled by hedge-fund manager Edward Lampert. He and his RBS Partners LP hedge fund own a total of 61.7 percent, while Fairholme Capital Management has 15.8 percent, data compiled by Bloomberg show.

Ciena Tumbles

Ciena tumbled 20 percent to $13.46. The economy is taking a toll, and Ciena has been slow to book revenue on new products, Chief Executive Officer Gary Smith said. Ciena’s biggest customers are phone carriers such as AT&T Inc.

August same-store sales at Gap, the biggest U.S. specialty- apparel retailer, climbed 9 percent, beating the average projection for a 5.5 percent gain from analysts surveyed by researcher Retail Metrics Inc. The shares added 2.7 percent to $36.11.

Visteon Corp. (VC) jumped 8.7 percent to $46.16 after South Korean auto-parts maker Mando Corp. said it may bid for Visteon’s 70 percent stake in Halla Climate Control Corp., Mando’s former affiliate.

Pandora Media Inc. (P) soared 14 percent to $11.52. The Internet radio service reported break-even second-quarter results, excluding some items, beating analysts’ estimates.

Stimulus Bets

The S&P 500 has climbed 11 percent in 2012 as global central banks have taken action to boost economic growth. The gauge may rally to 1,500 this year even as investors contend with rising risks created by modern market structure, said Laszlo Birinyi, president of Birinyi Associates Inc.

Birinyi, founder of the Westport, Connecticut-based research and money-management firm, reiterated the bullish call on shares that he has made since the S&P 500 began its 108 percent rally 3 1/2 years ago. His analysis is based in part on a comparison to past bull markets that started with gains such as the 29 percent advance during March and April 2009.

“If this market continues to track history -- and to date nothing has been a better guide -- we could see 1,500 before year end,” wrote Birinyi, who advised clients to buy equities before they bottomed in March 2009. “We like the market in part because it is a bull market. The day-to-day commentary is all good and fine for information but the reality is that in a bull market stocks go up.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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