U.S. Stocks Fall for Week on Global Growth Concern, Iraq

U.S. stocks fell for the week as lower estimates for global growth and escalating violence across Iraq halted a three-week rally that sent benchmark indexes to all-time highs.

Delta Air Lines Inc. sank 7.1 percent as oil capped its biggest weekly gain this year after the Iraq tension threatened to disrupt supplies. Newfield Exploration Co. added 8.5 percent to lead gains among energy producers. The Standard & Poor’s 500 Index halted a three-day slide on the final day of the week, gaining 0.3 percent, as Intel Corp. (INTC) rallied the most in three years after raising its sales forecast.

The S&P 500 fell 0.7 percent to 1,936.16 in the five days, its first weekly slide in a month. The Dow Jones Industrial Average slipped 148.54 points, or 0.9 percent, to 16,775.74. Both gauges had their worst week in two months.

“This has been a little bit of a ‘one step back’ kind of week,” Jim Russell, who helps oversee $120 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati, said by phone. “The fundamentals in the economy are solid, but the rising oil prices and conflict in the Middle East are a cause for concern.”

U.S. equities declined as the World Bank lowered its forecast for global growth, citing weaker outlooks for the U.S., China and Russia, while a surge in violence across Iraq raised the prospect of a return to sectarian civil war in OPEC’s second-biggest oil producer.

Valuations, Data

Investors also considered equity valuations after the S&P 500 closed at an all-time high on June 9. The measure trades at 16.4 times the projected earnings of its members, up from a multiple of 14.8 at the start of February. The Dow closed at a record on June 10.

Economic reports for the week showed U.S. retail sales rose a smaller-than-estimated 0.3 percent in May while applications for unemployment benefits climbed.

Geopolitical concerns shifted from the crisis in Ukraine to the worsening situation in Iraq. President Barack Obama said he’ll consider over the next several days options to help Iraqi forces turn back militants sweeping across the country. The insurgency highlights the risks to the world’s oil supply. West Texas Intermediate crude climbed 4.1 percent in the period.

Europe, Asia

The rally in oil sent equities in Europe lower for the first time in nine weeks. The Stoxx Europe 600 Index (VIX) slipped 0.1 percent as travel-related stocks posted the biggest drop of 19 industries in the gauge. An index of oil-related stocks rose the most.

Better-than-estimated data from China on retail sales and lending overshadowed the World Bank’s lower growth forecast and added to evidence that Premier Li Keqiang’s support measures are stabilizing the economy. That helped Asian equities climb for a fifth week, with the MSCI Asia Pacific Index rising 0.6 percent to cap the longest stretch of gains since August. The gauge touched a six-year high on June 11.

In the U.S., a measure of volatility rebounded from a seven-year low on June 6. The Chicago Board Options Exchange Volatility Index climbed 14 percent to 12.18, the biggest weekly gain since April.

“Sometimes market participants know which way they want it to go, they just need a reason,” Lawrence Creatura, a Rochester, New York-based portfolio manager at Federated Investors Inc., which oversees $366 billion in assets, said by phone. “This can cause unexpected news to have a disproportionate impact and we saw that this week with the tension in Iraq.”

Airlines, Boeing

U.S. airlines led losses in the S&P 500, with Delta sinking 7.1 percent to $39.24 and Southwest Airlines Co. dropping 4.7 percent to $26.30. Jet fuel and labor are airlines’ largest expenses. The price of jet fuel had climbed just 1.2 percent in the 12 months ended June 6. A 2.9 percent jump on June 12 was the most since October 2012.

Boeing Co. fell 4.3 percent to $132.29 after U.S. House Majority Leader Eric Cantor was defeated in a primary election, raising the prospect that congressional reauthorization of low-cost lending that benefits the plane maker may be blocked.

Tyson Foods Inc. sank 12 percent to $35.43. The largest U.S. meat company raised its offer for Hillshire Brands Co. to about $7.7 billion, outbidding Pilgrim’s Pride Corp. for the maker of Jimmy Dean sausages and Ball Park hot dogs. Hillshire rose 4.9 percent to $61.82, while Pilgrim’s Pride dropped 7.1 percent to $24.41.

Priceline, Intel

Priceline Group Inc. slid 3.9 percent to $1,189.30 after agreeing to buy OpenTable Inc. for $2.6 billion in cash. The deal will add restaurant booking to an online business already spanning flights, hotels and cars. OpenTable soared 48 percent to $104.48, a three-year high.

Newfield Exploration jumped 8.5 percent to $40.45 for a seventh weekly gain and a two-year high, as energy was the only industry of 10 in the S&P 500 to advance in the week.

Intel surged 6 percent to $29.87. The world’s largest semiconductor maker raised its second-quarter revenue forecast and said its annual sales will increase for the first time since 2011, buoyed by improving business demand for personal computers.

Family Dollar Stores Inc. jumped 10 percent to $66.66. Billionaire Carl Icahn has amassed a 9.4 percent stake in the discount retailer and may push for operating changes and ask the company to explore strategic alternatives, according to a regulatory filing.

H&R Block Inc. rallied 7.2 percent to a record $32.49. The biggest U.S. tax preparer said fiscal fourth-quarter profit climbed 35 percent as higher prices for its services and more online business boosted revenue.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Jeff Sutherland

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