Sept. 29 (Bloomberg) -- U.S. stocks fell, trimming the best September rally for the Standard & Poor’s 500 Index since 1939, amid concern that Europe’s debt crisis will worsen and the profit outlook for banks and retailers is deteriorating.
JPMorgan Chase & Co. and Wells Fargo & Co. declined more than 1.1 percent, pacing losses in financial companies. Urban Outfitters Inc. slumped 8.4 percent as Hennes & Mauritz AB, Europe’s second-largest clothing retailer, said third-quarter profitability missed analysts’ estimates. Benchmark indexes fluctuated earlier as energy stocks rallied on higher oil prices and Hewlett-Packard Co. advanced 2.2 percent after its earnings forecast topped estimates.
The S&P 500 fell 0.3 percent to 1,144.73 at 4 p.m. in New York. The Dow Jones Industrial Average declined 22.86 points, or 0.2 percent, to 10,835.28.
“The market’s had a nice rally and it’s waiting on the next factor to get it through the next level,” said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc. in Boston. “As the quarter ends and before earnings coming up, the market’s been swinging up and down.”
Alcoa Inc., the biggest U.S. aluminum producer, will become the first Dow company to report third-quarter results on Oct. 7. Earnings for the S&P 500 increased 24 percent during the period, according to the average analyst estimate in a Bloomberg survey.
The S&P 500 has jumped 9.1 percent so far this month, poised for its biggest September rally in 71 years, as concern eased that Europe’s debt crisis and U.S. unemployment will derail the economic rebound.
“The market’s been digesting what turned out to be one of the strongest Septembers in quite a while,” said Hank Smith, chief investment officer at Haverford Trust Co., which manages about $6 billion in Radnor, Pennsylvania. “We clearly had a nice bounce here on evidence that the risks of a double dip aren’t as high as we thought a month ago.”
U.S. banks followed European lenders lower on concern the region’s most-indebted nations will struggle to finance budget deficits. Spain’s top credit rating at Moody’s Investors Service is at risk as the nation struggles to emerge from recession and reduce its budget deficit, according to a Bloomberg News survey. Ireland will announce the cost of bailing out Anglo Irish Bank Corp. tomorrow.
Demonstrators in a dozen European cities marched today against government spending cuts. Spanish workers disrupted transportation and television broadcasts in the first general strike in eight years. In Athens, rail, communications and port workers staged strikes. Police in Dublin made an arrest after a truck damaged the front gates of the parliament building.
“The sovereign risk in Europe has been an on-and-off concern for the marketplace,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “It’s more a tug-of-war of how domestic growth here will play out versus international growth.”
JPMorgan Chase slumped 1.4 percent to $38.41 and Wells Fargo dropped 1.2 percent to $25.04, leading a measure of financial companies in the S&P 500 to a 0.8 percent decline that was the second-biggest drop among 10 groups in the index.
Morgan Stanley and Goldman Sachs Group Inc. declined after Meredith Whitney, founder of Meredith Whitney Advisory Group LLC in New York, reduced her full-year earnings estimates on the banks for 2010 through 2012.
Morgan Stanley slipped 0.1 percent to $24.48. Goldman Sachs lost 0.4 percent to $144.42. Analysts at Goldman also cut Morgan Stanley’s third-quarter profit projections, citing “soft” revenue from the firm’s fixed-income, currency and commodities and equities divisions.
“Investment bank earnings are likely to be soft in the third quarter 2010,” the analysts, led by Richard Ramsden, said in a note to clients dated yesterday. The largest adjustments are due to “muted activity” in fixed income and equities, they said.
Urban Outfitters sank 8.4 percent, the most since December 2008, to $31.96 for the biggest decline in the S&P 500. Stockholm-based Hennes & Mauritz said third-quarter profit rose 23 percent, missing analysts’ estimates as the gross margin narrowed. J. Crew Group Inc. fell 1.6 percent to $33.31 after Janney Montgomery analyst Adrienne Tennant cut the company’s rating to “neutral” from “buy.”
DuPont Co., the third-biggest U.S. chemical maker, declined 2.5 percent to $44.53, leading materials stocks to a 0.9 percent decline, the biggest out of 10 groups in the S&P 500.
Monsanto Co. fell 1.5 percent to $48, dropping for a 10th day in 11. Goldman Sachs said the company’s SmartStax corn, a new seed with eight genetic changes, probably won’t yield more than a less-expensive technology that has three added genes. Dow Chemical Co., which developed SmartStax with Monsanto, lost 1.7 percent to $27.39.
Hewlett-Packard climbed 2.2 percent to $42.53. Interim Chief Executive Officer Cathie Lesjak said the company expects 2011 earnings excluding costs of $5.05 to $5.15 a share on sales of $131.5 billion to $133.5 billion. Analysts had predicted sales of $131.7 billion and earnings of $5.01 a share, according to a Bloomberg survey. Lesjak also said the company plans to return cash to shareholders through dividends and buybacks.
A measure of energy stocks rallied 0.7 percent, one of 4 groups to gain out of 24 in the S&P 500, as crude oil rose to a seven-week high amid declining in supplies of gasoline and distillate fuel.
Schlumburger Ltd. advanced 2 percent to $61.52. EQT Corp. rose 4.6 percent to $35.98. The oil and natural gas producer said two Pennsylvania wells in the Marcellus Shale formation produced “exceptional” results.
Boeing, Green Mountain
Boeing Co. gained 2.3 percent to $65.97, the biggest advance in the Dow. The second-largest U.S. defense contractor received a contract for 124 F/A-18 fighter jets valued at $5.3 billion, the Pentagon said on its Web site.
Green Mountain Coffee Roasters Inc. fell 16 percent to $31.06 for the biggest retreat in the Russell 1000 Index. The maker of coffee and Keurig brewing machines said the U.S. Securities and Exchange Commission started an inquiry that may be related to the company’s “revenue recognition practices” and its relationship with a vendor.
Liberty Mutual Holding Co. shelved its initial public offering in Liberty Mutual Agency Corp., which sought to raise $1.3 billion in what would have been the biggest American IPO of 2010. The insurer said demand was less than projected.
At least 45 companies have delayed or canceled U.S. initial sales this year as concern that the recovery from the longest recession since the Great Depression is deteriorating sent the S&P 500 down as much as 16 percent from its 2010 high. The index has rebounded 12 percent from its low for the year in July.
FedEx Corp. Chief Executive Officer Fred Smith said China, India and Brazil are leading a recovery in the express-shipping industry and he’s optimistic about the company’s prospects next year.
“As we get into the second half of fiscal 2011 and roll into 2012, we’re very bullish,” Smith said at an investor conference today in Memphis, Tennessee, where FedEx is based. FedEx shares rose 2 percent to $86.37. The comments were made after markets closed.
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