U.S. Stocks Fall in S&P 500’s Biggest Weekly Drop in 2012

U.S. stocks retreated this week, with the Standard & Poor’s 500 Index having its biggest decline since December, amid weaker-than-estimated housing data and reports showing manufacturing contracted in Europe and China.

Stocks rose on March 23 as a jump in oil prices lifted energy shares. The rally failed to help the industry avoid posting the worst performance for the week among the S&P 500’s 10 groups, falling 3 percent as Baker Hughes Inc. slumped 11 percent. The Dow Jones Transportation Average lost 2.5 percent, the most since Nov. 25, as FedEx Corp. tumbled amid a disappointing earnings forecast. Apple Inc. advanced 1.8 percent after announcing its first dividend in 17 years.

The S&P 500 slipped 0.5 percent to 1,397.11 after rallying in 10 out of 11 weeks this year. The benchmark index is still up

2.3 percent for March and has risen for four straight months, poised for its longest string of monthly gains since September

2009. The Dow Jones Industrial Average lost 151.89 points, or

1.2 percent, to 13,080.73 after reaching its highest level since December 2007 on March 15.

“We’ve had a tremendous run in the market, so it doesn’t take much in terms of a slightly negative indicator or two to make investors contemplate taking some of the profits,” Peter Tuz, who helps manage $750 million as president of Chase Investment Counsel Corp. in Charlottesville, Virginia, said in a phone interview. “There was too much complacency in the market, and that’s why some of the data caught people by surprise.”

Economic Slowdown

Equities declined amid concerns of a global economic slowdown as a Chinese manufacturing index indicated a worse contraction this month while euro-area services and manufacturing output shrank more than forecast. In the U.S., new home sales fell for a second month in February and purchases of previously owned houses missed economists’ expectations. The labor market continues to show signs of improvement, with jobless claims dropping to the lowest level in four years.

About $3.5 trillion has been restored to American equity values as the S&P 500 rallied 27 percent from an October low amid better-than-expected earnings and economic data. The S&P 500 closed at the highest level since May 2008 on March 19, while the S&P SmallCap 600 Index reached a record and the Nasdaq Composite Index rallied to an 11-year high that day.

Shares fell in the following three days as concern about the global economy grew. Energy companies in the S&P declined more than any other industries during the week, sinking 3 percent. Baker Hughes, the world’s third-largest oilfield-services provider, tumbled 11 percent to $43.71 after saying that a shift away from gas rigs will hurt earnings.

‘Dubious Value’

Rowan Cos., an offshore-drilling contractor, slid 9.5 percent to $33.52. Former Chairman and Chief Executive Officer C. Robert Palmer said he’s “greatly disappointed by and concerned with” the company’s management. Rowan’s plan to move its legal headquarters to the United Kingdom is “of dubious value” because it will increase costs, he wrote in a letter to shareholders.

Industrial companies were the second-worst performing group in the S&P 500, falling 2.1 percent. Caterpillar Inc., the biggest maker of construction and mining equipment, tumbled 5.1 percent to $107.83 as BHP Billiton Ltd. said China’s steel production is slowing. United Technologies Corp., a maker of Pratt & Whitney jet engines and Sikorsky helicopters, dropped

4.3 percent to $81.80.

An index tracking 11 U.S. homebuilders slumped 4.2 percent this week as the decrease in home sales signaled that the recovery in the housing market may be uneven. The group surged 86 percent from Oct. 3 to March 16.

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, plunged 19 percent to $10.29 after it reported a decline in orders.

FedEx, Apple

FedEx fell 2.1 percent to $92.38. The largest cargo airline forecast a profit range for its current fiscal quarter whose low end trailed analysts’ estimates amid slowing express-shipment demand.

Apple climbed 1.8 percent to $596.05, helping drive the Nasdaq to the sixth straight weekly gain. The world’s largest technology company announced a quarterly dividend of $2.65 a share and said it will buy back $10 billion of its stock.

Shares of Apple were briefly halted on March 23 amid a system error on Bats Global Markets Inc. that caused incorrect price quotes. Bats, the six-year-old equity exchange, canceled its initial public offering after the computer malfunctions derailed trading in the company’s own market debut.

Hewlett-Packard Co. slid 3.5 percent to $23.63. The company will combine its personal-computer unit with the division that sells printers into a group led by Todd Bradley, who ran the PC business, to help cut expenses amid declining sales and profit.

‘Deeper Issues’

“Deeper issues will likely take more than management changes,” Maynard Um, an analyst with UBS AG in New York, said in a March 21 note to investors.

Sears Holdings Corp. dropped for the first time in six weeks, ending its longest string of weekly gains since 2004. The shares fell 12 percent to $72.36 for the biggest decline in the S&P 500. The retailer controlled by hedge-fund owner Edward Lampert faces “weaker” cash flow in 2013, Gary Balter, an analyst with Credit Suisse Group AG, wrote in a March 19 note. The stock surged 87 percent in the previous seven weeks after Sears announced plans to close stores and spin off units to generate cash.

Western Digital Corp. rose the most in the S&P 500, jumping 11 percent to $42.44. The maker of disk drives and networking products was raised to strong buy from buy at Needham & Co., meaning it is expected to have a total return of at least 25 percent over the next 12 months.

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