U.S. stocks joined a global selloff as political uncertainty in France and the Netherlands intensified concern about Europe’s sovereign debt crisis.
Bank of America Corp. fell 2.2 percent, following a drop in European lenders, as Dutch Prime Minister Mark Rutte offered to quit after lawmakers split over austerity and French President Nicolas Sarkozy lost the first round of his re-election bid. Monsanto Co. and U.S. Steel Corp. slid at least 1.8 percent as European and Chinese manufacturing shrank. Wal-Mart Stores Inc. retreated 4.7 percent amid a bribery probe in Mexico.
The Standard & Poor’s 500 Index fell 0.8 percent to 1,366.94 at 4 p.m. New York time, near its highest level of the day. The Dow Jones Industrial Average slid 102.09 points, or 0.8 percent, to 12,927.17. The Russell 2000 Index retreated 1.5 percent to 791.85. About 6.6 billion shares changed hands on U.S. exchanges, or 2.5 percent below the three-month average.
“Markets are realizing that messy European national politics could aggravate already complex economic and financial conditions,” Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., said in an e-mail today. His company is manager of the world’s largest bond fund.
Equities from Hong Kong to Paris and Sao Paulo slumped as the Dutch prime minister ran out of room to maneuver after budget talks with Geert Wilders’s Freedom Party collapsed, triggering doubts about his country’s ability to retain its AAA credit rating. French President Sarkozy and challenger Francois Hollande will be in a second round of elections, vying to lead a country split over measures to end a debt crisis.
Economic concern grew as euro-area manufacturing fell and data indicated China’s production will contract for a sixth month. Today’s drop trimmed this year’s gain in the S&P 500 to 8.7 percent, which had been driven by better-than-estimated economic and corporate data. Earnings per share have topped forecasts at 84 percent of S&P 500 companies that reported results since April 10, according to data compiled by Bloomberg.
“The financial markets are correcting, but they will do better later in the year,” said Byron Wien, the vice chairman of Blackstone Advisory Partners LP, whose parent, New York-based Blackstone Group LP, is the world’s biggest private-equity firm. “The U.S. is closer to self-sustaining momentum.” Wien has a forecast of 1,500 for the S&P 500 at the end of 2012, which would imply a 9.7 percent advance.
Economists surveyed by Bloomberg say that Federal Open Market Committee members, who begin a two-day meeting tomorrow, will likely keep monetary policy on hold as the U.S. shows signs of strength following record accommodation.
Tied to Economy
All 10 groups in the S&P 500 fell today. The Morgan Stanley Cyclical Index of companies most-tied to economic growth lost 1 percent. The Dow Jones Transportation Average, a proxy for the economy, declined 0.9 percent. A measure of homebuilders in S&P indexes tumbled 2.3 percent.
American banks joined a 3 percent drop in a gauge of European lenders. Bank of America declined 2.2 percent to $8.18. The shares have risen 47 percent this year. Citigroup Inc. decreased 1.9 percent to $33.25.
A measure of commodity shares in the S&P 500 dropped 1.4 percent. Monsanto, the world’s largest seed company, slid 1.8 percent to $75.74. U.S. Steel, the country’s largest producer of the metal by volume, lost 2.7 percent to $28.22.
Hedge funds cut their bets on higher commodity prices by the most in four months on mounting concern that Europe’s debt crisis will derail global growth and curb demand for raw materials. Money managers lowered net-long positions across 18 U.S. futures and options by 11 percent to 898,022 contracts in the week ended April 17, the most since Dec. 20, data from the Commodity Futures Trading Commission show.
Wal-Mart slumped 4.7 percent, the most in the Dow, to $59.54. Its probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn’t take strong enough action, corporate governance experts said.
Kellogg Co. tumbled 6.1 percent to $50.70. The largest U.S. maker of breakfast cereal cut its full-year earnings forecast, citing weaker-than-expected results in the first quarter.
Chief Executive Officer John Bryant said Kellogg faced “more significant challenges” in Europe and some categories in the U.S. in the first quarter than was expected. Net sales in the first quarter declined about 1.3 percent while earnings of $1 a share were unchanged from a year earlier, Kellogg said.
“We are obviously disappointed with the performance of the company,” Bryant said in the statement.
Apple Inc., which reports results tomorrow, fell 0.2 percent to $571.70, after swinging between gains and losses. Since rising to a record on April 9, the shares have lost 10 percent as some investors speculated Apple may not be able to keep growing at the pace that made it the most valuable technology company. On average, the analysts surveyed by Bloomberg estimate fiscal second-quarter earnings of $9.96 a share for the company.
Profits at the maker of iPhones and iPads have beaten analysts’ estimates 97 percent of the time since 2003, Birinyi Associates Inc. said in a note today. The stock rises by an average 2.6 percent from the close prior to earnings to 8 a.m. the next day, the data showed.
Quarterly reports scheduled for this week also include economic bellwether United Parcel Service Inc. and AT&T Inc., the largest U.S. phone company. Caterpillar Inc., the world’s biggest maker of construction and mining-equipment, and Amazon.com Inc., the world’s largest Internet retailer, are due to announce their results.
The analysts surveyed by Bloomberg raised their first-quarter earnings estimates for S&P 500 companies. Per-share profits grew 3.3 percent in the first three months of the year, Bloomberg data showed on April 20. That’s up from the previous week’s projection for a 1.7 percent increase. Earnings per share will grow 8.8 percent during all of 2012, the data show.
SunTrust Banks Inc. jumped 2.8 percent to $23.23. The eighth-largest U.S. lender by deposits reported first-quarter profit that beat analysts’ estimates.
Amylin Pharmaceuticals Inc. rallied 14 percent to $26.06. The maker of the diabetes drugs Bydureon and Byetta is seeking a buyer after rejecting an unsolicited bid from Bristol-Myers Squibb Co., two people with knowledge of the matter said.
Barnes & Noble Inc. advanced 18 percent to $13.41. Jana Partners LLC, a hedge fund that has pushed for companies to sell off assets, disclosed a 12 percent stake in the largest U.S. bookstore chain.