U.S. stocks tumbled, while commodities entered a bear market, after signals of a global slowdown in manufacturing added to disappointing housing and labor market data at the world’s largest economy.
Alcoa Inc. and Chevron Corp. slumped at least 3.4 percent to pace losses in commodity shares. Bed Bath & Beyond Inc. plunged 17 percent as its earnings forecast trailed estimates. ConAgra Foods Inc. rose 2.7 percent as the maker of Hebrew National hot dogs forecast profit that beat estimates. Standard & Poor’s 500 Index futures expiring in September rose 0.2 percent at 5:43 p.m. New York time as bank credit downgrades announced by Moody’s Investors Service matched expectations.
The S&P 500 fell 2.2 percent to 1,325.51 at 4 p.m. in New York, its second-biggest loss in 2012. The Dow Jones Industrial Average slid 250.82 points, or 2 percent, to 12,573.57. Volume for exchange-listed stocks in the U.S. was about 7.2 billion shares, or 6.9 percent above the three-month average.
“It’s risk off,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago, whose firm manages $717 billion. “The economy is losing momentum. The question will be how much the U.S. and China slow. On top of that, the Fed’s response yesterday was fairly tepid. While they indicated willingness to do more, they haven’t done it.”
Stocks from Hong Kong to London and Sao Paulo slumped on concern about a global slowdown. Data showed euro-area manufacturing shrank at the fastest pace in three years and a Chinese output gauge indicated contraction. More Americans than forecast filed claims for jobless benefits, manufacturing in the Philadelphia region shrank and sales of existing homes fell.
The reports came out a day after the Federal Reserve lowered its growth and employment estimates while signaling it may add to its record stimulus. The central bank yesterday extended its so-called Operation Twist program to replace short-term bonds with longer-term debt, disappointing some investors who expected more asset purchases. Former Fed Chairman Alan Greenspan today said the U.S. economy “looks very sluggish.”
The Citigroup Economic Surprise Index for the U.S., which measures how much data is missing or beating the median estimates in Bloomberg surveys, fell to minus 64.8, the lowest since August. It turned negative this year in April after remaining above zero since October. The Fed announced Operation Twist in September, four months after the index turned negative.
A challenging economic environment has made Goldman Sachs Group Inc. analyst Noah Weisberger recommend shorting the S&P 500, or bet on further declines. He has a target of 1,285, or 5.2 percent below yesterday’s close.
“With incremental U.S. monetary policy on hold, the market will need to confront a deteriorating growth picture near term,” Weisberger wrote.
Expectations for further policy action gave stocks their first back-to-back weekly gain since April on June 15. The S&P 500 earlier this month was on the brink of a so-called correction, or a 10 percent drop from a recent peak, on concern about a global slowdown and a worsening of Europe’s crisis.
All 10 S&P 500 groups fell today as commodity shares had the biggest losses. The Morgan Stanley Cyclical Index of companies most-tied to the economy lost 2.9 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 16 percent, the most since November, to 20.08.
Measures of commodity producers in the S&P 500 lost at least 3.2 percent for the biggest declines since November. The S&P GSCI Spot Index of 24 raw materials fell 2.8 percent to settle at 559. It has dropped 22 percent from this year’s highest close of 715.52 on Feb. 24, entering a bear market.
Alcoa, the largest U.S. aluminum producer, dropped 4.2 percent to $8.55. Chevron decreased 3.5 percent to $100.02.
The KBW Bank Index tumbled 2.3 percent as all of its 24 stocks retreated. Bank of America Corp. dropped 3.9 percent to $7.82. JPMorgan Chase & Co. slid 2.6 percent to $35.51.
In after-hours trading, Morgan Stanley jumped 3.4 percent after the world’s largest brokerage was downgraded two levels by Moody’s Investors Service rather than the three-grade cut that the ratings firm said was possible. The bank dropped 1.7 percent to $13.96 during regular trading.
Donald Jones, a Sterne Agee & Leach Inc. analyst, said in a June 19 note that the most likely outcome expected by bond investors was a three-grade rating cut.
Bed Bath & Beyond declined 17 percent, the most ever, to $61.17. It said comparable-store sales in the first quarter rose 3 percent compared with 7 percent a year earlier. Analysts projected a gain of 3.8 percent, the average of five estimates compiled by Bloomberg.
Red Hat Inc., the largest seller of the open-source Linux operating system, fell 6.2 percent to $53. Billings, a predictor of revenue, were $310 million in the quarter ended May 31, falling short of the $319 million average analyst estimate, said Abhey Lamba, an analyst at Mizuho Securities USA Inc.
Celgene Corp. fell 11 percent to $59.45. It withdrew its application in Europe to expand regulatory approval of Revlimid as a first option and maintenance therapy for patients with a deadly blood cancer.
Micron Technology Inc. retreated 7.8 percent to $5.65. The largest U.S. maker of computer memory reported a fourth consecutive quarterly loss after prices fell for chips used to store data in phones and tablets, crimping sales.
ConAgra jumped 2.7 percent to $25.26. The company forecast fiscal year 2013 earnings of at least $1.95 a share. On average, the analysts surveyed by Bloomberg estimated profit of $1.92.
Gannett Co. added 3.2 percent, the most in the S&P 500, to $13.47. The publisher of USA Today reaffirmed its long-term annual revenue growth targets. The owner of 82 daily newspapers and 23 television stations also said at an analysts’ conference that it sees improved ad trends across all of its groups.
Onyx Pharmaceuticals Inc. surged 43 percent to $63.78, the highest level on record, as it won support from a U.S. advisory panel for a drug to treat a deadly blood cancer that affects 50,000 Americans.
Facebook Inc.’s 22 percent rally in two weeks through yesterday has helped the company avoid posting the biggest slump among the largest U.S. initial public offerings since the start of 2011. The shares rose 0.8 percent to $31.84 today.
The social-network operator, which set a record for technology companies by raising $16 billion last month, has unveiled new products and services after the shares tumbled to a low of $25.87 on June 5.
PetroLogistics LP dropped 20.4 percent in its first month of trading, or 3.1 percentage points more than Facebook, giving the propylene maker the worst return among the 30 largest IPOs since the beginning of last year, data compiled by Bloomberg show.
Concern Facebook was overvalued and that the company will struggle to increase revenue fast enough pushed the stock down as much as 32 percent from its IPO price of $38 on May 17.
Since the shares bottomed earlier this month, Facebook introduced a real-time bidding platform to better target ads to consumers and ComScore Inc. released research that showed marketing on the social network is effective.
“Investors are starting to come around to see the significant opportunity of the Facebook platform,” Victor Anthony, a New York-based analyst at Topeka Capital Markets Inc., said in a telephone interview. He has a buy rating on the stock. “It was a botched IPO process but ultimately, the underwriters did their job. If the stock increasingly marches up, all the concerns will be tapered down.”