S&P 500 Caps Worst Monthly Drop Since September on Data

U.S. Stocks Wrap
Traders work at the New York Stock Exchange (NYSE) on May 30, 2012. Photographer: Scott Eells/Bloomberg

U.S. stocks fell, capping the biggest monthly decline for the Standard & Poor’s 500 Index since September, as disappointment with American economic reports overshadowed optimism that Greece will stay in the euro.

Energy shares dropped the most among 10 groups in the S&P 500, while the Bloomberg U.S. Airlines Index jumped 3.1 percent as oil had the biggest monthly decline in more than three years. Joy Global Inc. sank 5.4 percent as the maker of mining equipment cut forecasts. Bank of America Corp. rallied 2.1 percent to pace gains in financial shares. Facebook Inc. climbed 5 percent, rebounding from an earlier slump of 4.8 percent.

The S&P 500 decreased 0.2 percent to 1,310.33 at 4 p.m. New York time, after falling below 1,300 earlier today. The benchmark gauge has dropped 6.3 percent in May. The Dow Jones Industrial Average retreated 26.41 points, or 0.2 percent, to 12,393.45. About 8 billion shares changed hands on U.S. exchanges today, or 21 percent above the three-month average.

“There’s less of a growth backstop to the global economy,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The U.S. has held the position of stabilizing factor amid all the concern about Europe’s crisis. To the extent that the latest numbers suggest that momentum in the U.S. is slowing, that will make investors more nervous.”

Equities fell as data showed the U.S. economy grew more slowly in the first quarter than previously estimated and business activity expanded in May at the slowest pace in more than two years. The number of Americans applying for unemployment benefits rose. A Labor Department report due tomorrow is projected to show unemployment held at 8.1 percent.

Greek Polls

Benchmark gauges briefly rose today as two polls showed that the anti-austerity Greek Syriza party is likely to win second place. An inconclusive election on May 6 has stoked concern that Greece will be unable to form a government willing to implement austerity measures reached with the European Union as part of an international bailout. MSCI Inc. and Standard & Poor’s announced contingency plans for calculating their equity indexes should Greece leave the euro currency union.

“This is a chokepoint for Greece,” said Peter Sorrentino, who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati. “The question gets pushed to a resolution. It would be expensive for the rest of Europe to have Greece exit.”

Stocks also rebounded after the Wall Street Journal reported that the International Monetary Fund’s European department started contingency plans for a rescue loan to Spain should the country fail to find funds to bail out Bankia group. The IMF said it is not preparing financial aid for Spain and the country denied any talks about a bailout.

Biggest Losses

Concern about Europe’s debt crisis sent the S&P 500 lower for a second month, following the best first-quarter gain since 1998. Commodity, financial and technology companies fell at least 7.8 percent in May.

Energy shares in the S&P 500 dropped 0.9 percent today, the most among 10 groups, as oil sank after the U.S. Energy Department said stockpiles increased to a 22-year high.

Options traders are paying the most ever to protect against losses in Exxon Mobil Corp., spurred by concern expanding U.S. stockpiles and slowing economic growth will drive down the largest energy producer by market value. Exxon retreated 1.5 percent to $78.63, the lowest level since November.

Joy Global tumbled 5.4 percent to $55.86, driving industrial shares lower. The maker of P&H and Joy mining equipment cut forecasts for full-year earnings and revenue as mining companies ease capital expenditure amid concern over the slowdown in China. Caterpillar Inc., the largest maker of construction and mining equipment, slid 2.8 percent to $87.62.

Wider Loss

TiVo Inc. retreated 4.7 percent to $8.54. The company reported a first-quarter loss, citing hardware costs, and said legal expenses in the current period would lead to a wider loss than analysts expected.

Kohl’s Corp. dropped 6.2 percent to $45.82 after the retailer said May same-store sales decreased 4.2 percent. That compares with the average estimate for a 1.1 percent decline.

Banks had the biggest gain in the S&P 500 among 24 groups, adding 1 percent. The KBW Bank Index added 1.1 percent, reversing a loss of 1 percent. Bank of America gained 2.1 percent, the most in the Dow, to $7.35.

Facebook, which this week fell below $30 for the first time, rallied 5 percent to $29.60. The shares dropped earlier today amid concern that the world’s largest social-networking service will struggle to wring profit from its 901 million users.

Ciena’s Results

Ciena Corp. climbed 14 percent, the most since September, to $13.55. The maker of networking equipment rose after second-quarter sales and earnings topped analysts’ estimates. Ciena is capitalizing on demand for speedy fiber-optic networks, which transmit data in the form of light over fiber strands.

Talbots Inc. soared 89 percent, the most ever, to $2.44. The women’s clothing retailer trying to reverse falling sales agreed to be bought by private-equity firm Sycamore Partners for a reduced price of $369 million, including debt.

TJX Cos. rose 2.7 percent to $42.46. The owner of the T.J. Maxx and Marshalls retail chains posted an 8 percent increase in May same-store sales, topping analysts’ estimates of 5.1 percent as warm weather and lower gasoline prices boosted consumer spending. Target Corp., which also beat estimates, added 0.2 percent to $57.91.

“Traffic trends have picked up as hot summer weather spread over the majority of the nation,” Adrienne Tennant, an analyst at Janney Montgomery Scott LLC in Washington, wrote.

The S&P 500 may rebound almost 3 percent in June based on the average size of moves following past May declines of 4 percent or more, Bespoke Investment Group said.

Historical Moves

The benchmark gauge has fallen 4 percent or more in May on 15 occasions since 1928, followed by an average June increase of 2.8 percent, according to data compiled by Bespoke. The index rose in June 60 percent of the time following such moves.

The last time the S&P 500 slid more than 4 percent during May of a U.S. presidential election year was in 1984, when it tumbled 5.9 percent before rebounding 1.8 percent in June. This year’s slide may also mark a bottom for the market followed by a June rally, Justin Walters, Bespoke’s co-founder, said in a phone interview yesterday.

“The data certainly leans positive,” Walters said. “Along with the election analysis and the big down Mays, the risk-reward favors the market going positive here.”

The S&P 500 has averaged a gain of 0.51 percent in June following an increase in May, the Bespoke report showed, and the index has risen 0.96 percent in June after May declines. Its performance next month ultimately will be determined by Europe’s handling of the government-debt crisis, according to Walters.

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