U.S. stocks fell for the second straight week as evidence of a slowing global economic recovery overshadowed speculation that the Federal Reserve may introduce new stimulus measures.
The Standard & Poor’s 500 Index rallied on the final day after Fed Chairman Ben S. Bernanke said more bond purchases are an option to lower the jobless rate. Hewlett-Packard Co. led declines among the biggest U.S. corporations with a 4 percent drop. Sears Holdings Corp. fell 6.7 percent after losing its place in the S&P 500. Hudson City Bancorp jumped 12 percent after M&T Bank Corp. agreed to acquire the company.
The benchmark gauge for American equities erased 0.3 percent to 1,406.58 after slipping 0.5 percent the previous week. The Dow Jones Industrial Average lost 67.13 points, or 0.5 percent, to 13,090.84 in the latest week.
“People began questioning whether the market has gotten a little ahead of itself,” John De Clue, the Minneapolis-based global investment strategist at U.S. Bank Wealth Management, which oversees $104 billion, said in a telephone interview. “Europe continues to weaken. In the U.S., we got excited about gross domestic product being revised to 1.7 percent but, boy, that’s still a low number.”
Equities slid earlier in the week as data showed economic confidence in the euro area and retail sales in Japan fell more than estimated. The U.S. economy climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent. Separate data showed more Americans than forecast filed for unemployment benefits, a sign that progress in the labor market is faltering.
Bernanke said in Jackson Hole, Wyoming, that he wouldn’t rule out more stimulus to combat the stagnation in the labor market, which he called a “grave concern.” Two rounds of large-scale asset purchases totaling $2.3 trillion have failed to reduce the jobless rate below 8 percent more than three years into the recovery.
He spoke two weeks before the next meeting of the Federal Open Market Committee and prior to the Labor Department’s nonfarm payrolls report on Sept. 7. The European Central Bank also meets Sept. 6 in Frankfurt, where they may announce their own bond-buying program to quell the euro-area debt crisis.
“The Fed is showing a high sensitivity to the labor market,” Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, said in a phone interview. His firm oversees $152 billion. “If the job market continues to soften, then that would be a big data justification for further quantitative easing.”
Benchmark U.S. equity indexes rose in August for the third straight monthly advance as the U.S. central bank pledged to act to safeguard the economic recovery if needed and European leaders worked to tame the region’s debt crisis. The S&P 500 in August climbed to its highest level on an intraday basis in more than four years, then failed to close at that milestone. The index has fluctuated near the 1,400 level for three weeks.
Trading has slowed toward the end of the summer as investors awaited the Fed’s gathering in Wyoming. Volume on exchange-listed stocks was below 5 billion shares for five straight days through Aug. 30, the longest stretch since at least 2008, excluding Christmas and New Year holidays.
Volatility also diminished in August. Intraday price swings in the S&P 500 averaged 0.8 percent in August, the smallest fluctuation for any August in 17 years, according to data compiled by Bloomberg.
“There are so many negative factors that could potentially make the situation worse,” Brian Peery, who helps oversee about $1 billion at Novato, California-based Hennessy Funds, said in an Aug. 30 phone interview. “It doesn’t take a whole lot to push the market toward the negative side.”
Investors sold shares of companies most tied to economic growth during the week. The Morgan Stanley Cyclical Index slumped 1.2 percent, while the Dow Jones Transportation Average dropped 2.2 percent. Out of 10 groups in the S&P 500, industrial, energy and material companies helped lead losses.
Hewlett-Packard fell 4 percent for the biggest drop in the Dow, to $16.88, after sliding 9.9 percent in the previous week when the company posted a record quarterly loss amid slumping sales for personal computers and services aimed at businesses.
Bank of America Corp., the second-largest U.S. bank by assets, lost 2.1 percent to $7.99, while Coca-Cola Co., the world’s largest soft-drink maker, sank 2.8 percent to $37.40.
First Solar Inc. plunged 19 percent, the most in the S&P 500, to $19.99. The biggest U.S. solar manufacturer halted panel deliveries to the $1.8 billion Agua Caliente project, which it’s building in Arizona, because construction is ahead of schedule and the company must slow down to meet contractual milestones.
Sears, the retailer controlled by hedge fund manager Edward Lampert, fell 6.7 percent to $52.75 after losing its place in the S&P 500 to chemical maker LyondellBasell Industries NV. S&P said Hoffman Estates, Illinois-based Sears has too few shares available for trading to be representative of companies in the index.
Ciena Corp., a maker of communications-network equipment, tumbled 19 percent to $13.67 after reporting a wider-than-projected loss and forecasting lower revenue than analysts had estimated. The economy is taking a toll, and Ciena has been slow to book revenue on new products, Chief Executive Officer Gary Smith said.
Facebook Inc. dropped 7 percent to a record low $18.06 on concern that businesses are spending less to advertise on the world’s largest social-networking website. The Menlo Park, California-based company may post $5.04 billion in sales this year, EMarketer Inc. estimated, down from the market researcher’s earlier projection for $6.1 billion.
Hudson City Bancorp rallied 12 percent, the most since December, to $7.19. M&T Bank agreed to buy Hudson City for about $3.7 billion in the banking industry’s biggest takeover this year as it seeks to expand in New Jersey.
Tiffany & Co. jumped 5.9 percent to $61.95. The world’s second-largest luxury jewelry retailer gained after reporting a drop in worldwide comparable-store sales that was smaller than some analysts projected.
Consumer discretionary stocks added 0.2 percent for the biggest advance for the week in the S&P 500 as a report showed consumer spending climbed in July for the first time in three months.