U.S. Stocks Fall Most in Week Since June on IMF, Profits

U.S. stocks had the biggest weekly retreat since June as the International Monetary Fund reduced its global growth forecasts and projections from Advanced Micro Devices Inc. and Alcoa Inc. disappointed investors.

All 10 industry groups in the Standard & Poor’s 500 Index fell for the week. Technology companies slumped 2.9 percent as AMD cut its sales forecast and Apple Inc. had its longest string of weekly losses since July. Dollar Tree Inc. led consumer-discretionary shares to a 2.9 percent drop after saying revenue will be at the low end of its estimate. Alcoa slid 4.4 percent after trimming its global aluminum outlook while Wells Fargo & Co. sank 4.4 percent amid narrower profit margins.

The S&P 500 tumbled 2.2 percent to 1,428.59 for the week. The Dow Jones Industrial Average fell 281.30 points, or 2.1 percent, to 13,328.85. Both gauges had their biggest weekly retreat since June 1.

“We’re in this quarterly period of maximum uncertainty,” Dan Veru, who oversees $3.5 billion as chief investment officer at Palisade Capital Management LLC in Fort Lee, New Jersey, said in a phone interview. “Earnings haven’t started in earnest yet, but the companies that have bad news to report are putting their news out. We’re just early in the process and that makes it tricky. I’m trying not to read too much into it.”

Stocks fell worldwide as the IMF reduced its global growth estimate for 2012 to 3.3 percent from 3.5 percent, the slowest since the 2009 recession. The Washington-based lender warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies. Economic reports during the week showed confidence among U.S. consumers unexpectedly jumped in October to the highest level since before the recession began five years ago and jobless claims fell to the lowest since 2008.

Earnings Season

The S&P 500 has lost 0.9 percent since Alcoa unofficially started the earnings season with release of its third-quarter numbers on Oct. 9. S&P 500 profits declined 0.9 percent during the July-to-September period, the first income drop since 2009, analyst estimates compiled by Bloomberg show.

Among the 35 S&P 500 companies that have reported so far, 69 percent beat analysts’ estimates, the data show. Profits have exceeded their forecasts by an average 7.6 percent, more than double the rate for the previous quarter.

The S&P 500 has rallied 14 percent this year as the Federal Reserve announced a third round of bond buying to stimulate economic growth and pledged to keep its target interest rates near zero through at least mid-2015.

‘Market Dictates’

The Fed’s action “has changed the relationship between the economy and the stock market, and corporate earnings and the stock market,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $85 billion, said in an Oct. 11 phone interview. “It should be over the long term the economy dictates how well the stock market will do, but now the stock market dictates how well the economy is going to do. It means that earnings are not as significant right now as it used to be.”

Alcoa, the largest U.S. aluminum producer, fell 4.4 percent to $8.69 for the week after reducing its 2012 forecast for global consumption of the metal by 1 percentage point on slowing Chinese demand. Stimulus spending may result in a pick-up in demand from China at the end of the fourth quarter, Chief Executive Officer Klaus Kleinfeld said on a conference call with analysts.

Technology shares in the S&P 500 tumbled the most since May. AMD lost 15 percent to $2.74. The second-largest maker of processors for personal computers cut its third-quarter revenue forecast, citing weak demand across all product lines. It joins other computer-component makers suffering fallout from sluggish growth and a shift in consumer tastes toward mobile devices, away from traditional desktop and laptop machines.

Apple Retreats

Apple retreated 3.5 percent to $629.71 for the third straight weekly loss. Earnings growth at the world’s most valuable company may slow to less than 10 percent beyond 2014 as demand in developed markets weakens and a shift to emerging markets may come at the cost of profit margins, Stuart Jeffrey, an analyst with Nomura Holdings Inc., wrote in an Oct. 9 note to clients. He initiated coverage with a neutral rating.

Shares of the iPhone maker have fallen 10 percent from an all-time high of $702.10 on Sept. 19, driving the stock below its average price in the past 50 days for the first time since July. The shares are still up 55 percent this year.

Consumer Shares

A gauge of consumer-discretionary stocks fell 2.9 percent. Dollar Tree, the U.S. operator of more than 4,500 discount stores, tumbled 14 percent to $40.11. Chief Executive Officer Bob Sasser said third-quarter sales will be at the low end of its forecast because of uncertainty about the U.S. presidential election, high gas prices and long-term unemployment. The company in August projected revenue of $1.71 billion to $1.75 billion for the period.

Home Depot Inc. fell 5.8 percent to $59.56. The largest U.S. home-improvement retailer was cut to market perform from outperform at Oppenheimer & Co. The stock, which surged more than 120 percent from a low in August 2011 through Oct. 5, is “due for a breather,” analyst Brian Nagel wrote in an Oct. 10 note.

Wells Fargo, the largest U.S. mortgage lender, dropped 4.4 percent to $34.25. Net interest margin, the difference between what the bank makes on loans and pays for funds, fell by 0.25 percentage point to 3.66 percent during the third quarter, the company said. The drop was worse than guidance from Chief Financial Officer Timothy Sloan, who said on Sept. 11 that the margin might narrow by about the same as last year’s 0.17 percentage point.

Shifting Balance

Phone companies fell the most in the S&P 500, sinking 4.5 percent. Sprint Nextel Corp. said it’s in talks to take a “substantial” investment from Softbank Corp., Japan’s third-largest mobile-phone company, potentially shifting the balance of power in the U.S. telecommunications industry. MetroPCS Communications Inc., which Sprint has considered buying, slumped 6.1 percent to $11.88. AT&T Inc. erased 5.9 percent to $35.63. Sprint rallied 10 percent to $5.73.

Edwards Lifesciences Corp. slumped 20 percent, the most in the S&P 500, to $87.10. The maker of artificial heart valves said third-quarter sales were lower than the company’s forecast.

Wal-Mart Stores Inc. climbed 0.9 percent to a record $75.81. The world’s largest retailer said its back-to-school season was “very strong” and annual sales would grow as much as 7 percent next year. Jefferies & Co. lifted the stock to buy from hold.

Yum! Brands Inc., owner of the Taco Bell and KFC fast-food chains, rallied 5.2 percent to $69.45 after third-quarter profit topped analysts’ estimates on sales gains in the U.S. and China.