U.S. Stocks Drop as Retail Sales Fall, Commodities Tumble

U.S. stocks fell, dragging the Standard & Poor’s 500 Index down from a record, as government data showed retail sales unexpectedly fell in March, commodities plunged and a gauge of consumer sentiment slipped.

Raw-material and energy shares lost the most among 24 groups in the S&P 500. Newmont Mining Corp. slumped 5.9 percent as gold dropped to its lowest since July 2011. DuPont Co. and Alcoa Inc. slid at least 0.9 percent. Banks (SPXL2) retreated 1.1 percent as Wells Fargo & Co. reported a drop in revenue and M&T Bank Corp. delayed its planned purchase of Hudson City Bancorp.

The S&P 500 fell 0.3 percent to 1,588.85 at 4 p.m. in New York, paring an earlier decline of as much as 0.8 percent. The Dow Jones Industrial Average dropped less than 1 point to 14,865.06, erasing a drop of 0.5 percent earlier in the day. The benchmark indexes closed at all-time highs yesterday. About 5.9 billion shares changed hands on U.S. exchanges, 5.3 percent lower than the three-month average.

“We’ve seen this market go up quite a bit,” Terry L. Morris, who helps oversee about $2.6 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. “A lot of investors are cautious at this point and are quick to sell on any kind of signs of a slowdown.”

The 0.4 percent decrease in U.S. retail sales, the biggest since June, followed a 1 percent gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading in March. Department stores and electronics dealers were among the weakest showings.

Consumer Confidence

The Thomson Reuters/University of Michigan preliminary sentiment index for April fell to 72.3 from 78.6 in March. No change was projected for this month’s reading compared with March, according to the median estimate of 69 economists surveyed by Bloomberg.

Companies in the U.S. added to inventories in February at the slowest pace in eight months, a separate Commerce Department report showed, putting them in a better position to deal with a subsequent slowdown in demand.

Euro-area finance ministers agreed in principle at a meeting in Dublin today to extend the maturities on rescue loans to Ireland and Portugal by seven years. Cyprus President Nicos Anastasiades will seek an increase to the nation’s 10 billion- euro ($13 billion) bailout from the European Union, according to a government official, who asked not to be identified.

Bull Market

The bull market in U.S. equities entered its fifth year last month. The S&P 500 (SPX) has surged 135 percent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy. The benchmark gauge added 2.3 percent this week amid optimism over central-bank stimulus and corporate earnings.

Investors will be watching closely as the number of earnings reports increases in the weeks ahead, helping to gauge the health of the economy. Profits at S&P 500 companies dropped 1.4 percent in the first three months of the year, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.

Seventy percent of the 30 companies that have reported results so far beat estimates. Bank of America Corp., Coca-Cola Co., Google Inc. and General Electric Co. are among companies that will release earnings next week.

The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against declines in the S&P 500, fell 1.5 percent to 12.06 today. The gauge, known as the VIX, is down 33 percent this year and reached its lowest level since February 2007 last month.

Cyclical Index

Fourteen out of the 24 industries in the S&P 500 declined today. A gauge of stocks closely tied to economic growth retreated, as the Morgan Stanley Cyclical Index fell 0.5 percent to snap a four-day rally. DuPont slipped 0.9 percent to $49.82 and Alcoa lost 1.2 percent to $8.22.

The KBW Bank Index slumped 1.1 percent, even as Wells Fargo and JPMorgan Chase & Co. posted results that topped analyst estimates.

Wells Fargo (WFC) dropped 0.8 percent to $37.21. The largest U.S. home lender posted a 22 percent rise in first-quarter profit that beat forecasts as the bank curbed expense growth. Revenue, mortgage banking income and lending margins fell.

JPMorgan slipped 0.6 percent to $49.01. First-quarter profit rose 33 percent as improving consumer credit quality allowed the bank to cut loan-loss reserves by $1.2 billion. While mortgage volume jumped 37 percent, mortgage-banking net income dropped 31 percent. The largest U.S. bank by assets said 2013 net interest income will be 1 percent lower than the year- earlier period.

‘Low Quality’

“They beat, but it’s kind of a low-quality beat,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages $120 billion. “What these companies need to see is better economic growth and with that an increase in longer term interest rates. We’re not seeing that yet.”

M&T Bank fell 4.5 percent to $100.24, the lowest close of the year. The lender said a Federal Reserve review of its compliance with money-laundering rules has delayed its planned purchase of Hudson City. Shares of Hudson City dropped 5.5 percent to $8.29.

Energy and raw-materials companies in the S&P 500 tumbled more than 1.3 percent as the S&P/GSCI index of commodities fell to the lowest level since July.

Gold Plunges

Gold for June delivery tumbled 4.1 percent to settle at $1,501.40 an ounce in New York, entering what many consider a bear market after slumping more than 20 percent from an August 2011 record. Crude oil lost 2.4 percent to settle at $91.29 a barrel, the lowest in a month.

Newfield Exploration Co. fell 4.1 percent to $21.70. Newmont Mining dropped 5.9 percent to $36.37, its lowest close in four years. Cliffs Natural Resources Inc., the largest U.S. iron-ore miner, declined 3.6 percent to $19.20.

Home Depot Inc., the largest home-improvement retailer, jumped 2.4 percent to $73.62 for the biggest gain in the Dow. An analyst with Jefferies LLC increased his recommendation on the stock to buy from hold.

Biogen Idec Inc. (BIIB) advanced 3.4 percent to $207.01. The biotechnology company was boosted to buy from neutral at Bank of America Corp.

Ashland Inc. climbed 9.9 percent to $86.66, an all-time high. Activist investor Jana Partners LLC acquired a 7.4 percent stake in the biggest producer of specialty papermaking chemicals and has spoken to management.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Lindsey Rupp in New York at lrupp2@bloomberg.net

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

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