U.S. stocks fell this week, dragging the Dow Jones Industrial Average below 10,000, as lower-than-estimated jobs growth and a worsening government debt crisis in Europe fueled concern the global economic recovery will slow.
Alcoa Inc., Home Depot Inc. and Caterpillar Inc. sank at least 4.9 percent for the biggest losses in the Dow as the government employment report triggered a selloff yesterday that erased gains from earlier in the week. All 10 industry groups in the Standard & Poor’s 500 Index fell, led by commodity producers as Freeport-McMoRan Copper & Gold Inc. slid 10 percent after saying China’s steps to slow growth will hurt demand for copper.
The S&P 500 tumbled 2.3 percent this week to 1,064.88 and the Dow retreated 2 percent to 9,931.97, the lowest level since Feb. 8.
“I remain cautious on the market because the economy is transitioning,” said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “I’m looking for the employment market to show signs of sustainable growth,” he said. “Where I continue to see things as most vulnerable is internationally.”
The S&P 500 has fallen 13 percent from a 19-month high on April 23 as credit-ratings downgrades of Greece, Portugal and Spain triggered concern some European governments will struggle to fund deficits and China took measures to cool growth to avoid asset bubbles. Concern that Hungary may default sent that country’s currency to an almost 15-month low against the dollar and dragged the euro below $1.20 for the first time since March 2006.
The S&P 500 halted its first back-to-back advance since April after payrolls rose by 431,000 in May, compared with a gain of 536,000, the median economist forecast in a Bloomberg News survey. Private payrolls, which do not include government workers and temporary census jobs, rose by 41,000, trailing the 180,000 gain forecast by economists.
“Everyone is looking at the private payrolls component as the culprit,” said William Nichols, co-head of U.S. equities at Cantor Fitzgerald LP in New York. “The bears have always said this is a jobless recovery and now they can continue to say that.”
Alcoa, the largest U.S. aluminum producer, fell 6.9 percent this week to $10.84, the lowest since July 2009. Home Depot slumped 5.1 percent to $32.15. Caterpillar, the world’s largest maker of construction equipment, dropped 4.9 percent to $57.76.
Freeport-McMoRan sank to $62.81, the lowest since September 2009, after the company and Codelco, the world’s two largest copper producers, said China’s plans to curb its economy threaten to reduce demand for the metal after prices slumped 15 percent in two months.
Industrial companies had the second-biggest drop this week among 10 groups, falling 3.8 percent. Textron Inc., the maker of Cessna aircraft, led the group down, tumbling 8.3 percent to $18.96. R.R. Donnelley & Sons Co., North America’s largest printer, lost 7.4 percent to $17.74, the lowest since September 2009. Ryder System Inc., the largest U.S. truck-leasing company, declined 7.3 percent to $41.67.
Energy companies in the S&P 500 fell 2.5 percent. BP Plc sank 13 percent to $37.16. BP shares have plunged 39 percent since the Deepwater Horizon drilling rig leased by the company exploded on April 20. Anadarko Petroleum Corp., the Texas oil company that owns a stake in BP’s leaking Gulf of Mexico well, dropped 14 percent to $45.12. National Oilwell Varco Inc., the biggest maker of oilfield equipment, lost 9.1 percent to $34.66.
Tellabs Inc. declined 22 percent, the most in the S&P 500, to $6.98. The maker of telecommunications equipment had its share-price estimate cut by Barclays Plc on concern it may not be picked by AT&T Inc. as a supplier for a high-speed wireless Internet network known as long-term evolution.
Profits for companies in the S&P 500 are forecast to rise 17 percent to a combined $81.34 a share in 2010, according to estimates from more than 2,000 analysts tracked by Bloomberg. That implies a price-earnings ratio of about 13.1, compared with an average multiple of 20.8 since April 1991, according to data compiled by Bloomberg.
Forecasts for the U.S. economy to expand 3.2 percent this year and 3.1 percent in 2011 incorporate estimates that the jobless rate will decline to 9.6 percent by the end of 2010 and 9 percent a year later. It slipped to 9.7 percent in May from 9.9 percent.
The Chicago Board Options Exchange Volatility Index, or VIX, ended the week at 35.48, rising 11 percent. Higher readings indicate investors are paying more for insurance against declines in the S&P 500.
“There will be volatility with a downward bias,” Gayle said. “Equity markets are going to regain their footing this year but it’ll probably be into the fall before that happens.”