U.S. stocks retreated, snapping a four-day advance for the Standard & Poor’s 500 Index, as banks fell and investors speculated that tomorrow’s jobs report will show the world’s largest economy continues to struggle.
Financial stocks dropped the most within 10 groups in the S&P 500, sliding 2.4 percent. Goldman Sachs Group Inc. slumped 3.5 percent after agreeing to pay future Federal Reserve penalties and write down $53 million of mortgage loans in New York to gain approval for its sale of Litton Loan Servicing LP. Caterpillar Inc. and Alcoa Inc. fell at least 2.4 percent, pacing losses among companies most-tied to economic growth.
The S&P 500 declined 1.2 percent to 1,204.42 at 4 p.m. in New York. The benchmark gauge rallied 5.1 percent during a four-day streak through yesterday. The Dow Jones Industrial Average lost 119.96 points, or 1 percent, to 11,493.57.
“There is some reserve and perhaps some hesitance going into tomorrow’s jobs report,” Robert Pavlik, chief market strategist at Banyan Partners LLC in New York, said in a telephone interview. The firm manages over $1 billion. “The administration has a huge task in front of it. Business leaders are hesitant to hire and spend money. That’s why the stock market generally hasn’t done anything.”
Stocks fell before a Labor Department report tomorrow that may show non-farm payrolls climbed by 68,000 after a 117,000 increase in July, according to the median forecast of economists surveyed by Bloomberg News. Goldman Sachs Group Inc.’s Jan Hatzius cut his forecast for the gain to 25,000 from 50,000. Brian Jones, an economist at Societe Generale, lowered his prediction to an increase of 9,000 from 67,000.
Shares rose earlier after the Institute for Supply Management’s factory index fell to 50.6, beating the median economist projection of 48.5. The data helped ease concern spurred by Federal Reserve data in August showing manufacturing slowed in the New York, Philadelphia and Richmond, Virginia, regions. The S&P 500 climbed yesterday, paring its August decline to 5.7 percent, the biggest monthly drop since May 2010.
Stocks trimmed losses at the end of last month after Federal Reserve Chairman Ben S. Bernanke said during an Aug. 26 speech in Jackson Hole, Wyoming, that the central bank still has tools to stimulate the economy without signaling he will use them. Last year, he foreshadowed a $600 billion bond-purchase program at the same event, helping to stoke a 30 percent surge in the S&P 500 through April 29. Since then, the index has fallen as much as 18 percent amid economic concern.
‘May Not Like It’
“Every time you get some positive data for the economy, people think the Fed will take the possibility of a QE3 off of the table,” Thomas Nyheim, a Greenville, Delaware-based money manager for Christiana Trust, which oversees $7.5 billion, said in a telephone interview about a third round of so-called quantitative easing from the central bank. “We may not like it, but we’ll probably need to get used to slower growth.”
Stock futures swung between gains and losses before the open of regular trading as a report showed that applications for U.S. unemployment benefits fell last week as the influence of the strike at Verizon Communications Inc. waned, showing the job market is making little headway more than two years after the recession ended.
All 10 groups in the S&P 500 fell today, with losses being led by financial, industrial and raw-material companies. The KBW Bank Index slid 3 percent as all of its 24 stocks retreated.
Goldman Sachs slumped 3.5 percent to $112.16. The Fed ordered Goldman Sachs to conduct an independent review of Litton’s foreclosures in 2009 and 2010 to address a “pattern of misconduct and negligence,” the regulator said today in a statement. Litton’s sale to Ocwen Financial Corp. was completed today after reaching accords with the Fed and New York state regulators, according to a Goldman Sachs statement.
The shares also fell after the bank was downgraded to “hold” from “buy” at ISI Group. The 12-month share-price estimate is $135.
Gap Inc. lost 3 percent to $16.03. The largest U.S. apparel chain reported sales at its stores open more than one year fell 6 percent, more than the 3.9 percent drop estimated by analysts.
The Morgan Stanley Cyclical Index of companies most-sensitive to economic activity dropped 2 percent. Caterpillar decreased 2.7 percent to $88.55, while Alcoa slid 2.4 percent to $12.49.
Concerns that the S&P 500 will plunge amid slowing earnings growth are overblown, according to Liz Ann Sonders of Charles Schwab Corp.
More Than Double
The benchmark measure of U.S. equities surged as much as 102 percent from a 12-year low in March 2009 through the end of April this year as earnings beat analysts’ estimates. Profits at S&P 500 companies are forecast to grow to $124.11 a share in 2013, according to analyst estimates compiled by Bloomberg. That’s more than double the annual increase during the 2008-2009 financial crisis.
“There is this misperception that the minute the peak of earnings happens, the market is going to fall out of bed,” Sonders, New York-based chief investment strategist at Charles Schwab, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The market tends to continue to fare pretty well unless you get some sort of massive collapse in earnings, which I don’t think is in the cards this time.”