U.S. stocks fell for the sixth straight week, giving the Dow Jones Industrial Average its longest slump since 2002, as investor concern that the global economy is slowing intensified.
Technology stocks and consumer companies reliant on discretionary spending led losses in the Standard & Poor’s 500 Index, dropping more than 2.7 percent as a group. PulteGroup Inc., the nation’s biggest homebuilder, slumped 11 percent for the largest retreat in the S&P 500. Visa Inc. (V) and MasterCard Inc. (MA) decreased more than 3.6 percent after the U.S. Senate rejected a six-month delay of a Federal Reserve rule capping debit-card swipe fees set by the companies.
The S&P 500 lost 2.2 percent to 1,270.98, its lowest level since March 16. The benchmark gauge for U.S. equities has also dropped for six consecutive weeks, the longest retreat since 2008. The Dow fell 199.35 points, or 1.6 percent, to 11,951.91. Its last weekly slump of this length was in October 2002, the start of a five-year bull market for equities.
“The market is still digesting that there’s been a softening in economic growth in the U.S. and other parts of the world,” said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $38 billion. “That disappointing economic news has caused investors to turn more cautious. They could shrug off bad economic data in the first quarter. It’s harder to continue doing it in the second quarter.”
$1 Trillion Lost
More than $1 trillion has been erased from American equity markets since the S&P 500’s peak on April 29. Equities slumped this week amid weaker-than-expected economic reports, while Fed Chairman Ben S. Bernanke said that the U.S. recovery was “frustratingly slow.”
The S&P 500’s 6.8 percent slump since the end of April has cost the benchmark index the biggest rally in more than five decades. The measure gained 102 percent between March 9, 2009, and April 29 of this year, the largest advance over the same period of time since 1955, according to Howard Silverblatt at S&P. Now, it’s up 88 percent, the most since 1999.
Stocks extended their weekly decline yesterday after prices of goods imported into the U.S. unexpectedly rose, U.K. manufacturing dropped more than economists forecast and China reported a less-than-estimated $13.1 billion trade surplus in May as surging imports added pressure for higher interest rates in the world’s second-largest economy.
Bernanke said on June 7 that the central bank should maintain record monetary stimulus to boost an “uneven” economic recovery, even as he gave no hint of a new round of so- called quantitative easing as policy makers plan this month to complete a $600 billion bond purchase program.
“It was a very ugly week,” said Andrew Ross, partner and global equity trader at First New York Securities LLC, a New York-based proprietary trading firm that bets on stocks, commodities and derivatives. “Traders grappled with rising macro concerns in the face of a Federal Reserve without the political will to push forward on a new round of stimulus.”
A gauge of technology companies in the S&P 500 lost 3.3 percent this week, the most among 10 industries. Cisco Systems Inc. slipped 5.6 percent to $15.12, the lowest price for the largest maker of networking equipment since March 2009.
Companies most-tied to economic growth slumped. The Morgan Stanley Cyclical Index dropped 2.2 percent as 26 of its 30 stocks retreated. The S&P 500 Consumer Discretionary Index decreased 2.7 percent.
Financial shares had the third-biggest decline within 10 industries in the benchmark index, falling 2.6 percent. The group is the worst-performing of the 10 main industries in the index this year, down 7.3 percent. Bank of America Corp. (BAC), the biggest U.S. lender, fell 4.3 percent to $10.80.
Banks with at least $50 billion in assets will be required to conduct annual exams to “ensure that institutions have robust, forward-looking capital planning processes that account for their unique risks and that permit continued operations during times of economic and financial stress,” the Fed said yesterday in a statement in Washington.
Wells Fargo & Co., the largest U.S. home lender, lost 2.2 percent to $26.28 after Rochdale Securities LLC’s Richard Bove cut his recommendation to “sell” from “neutral,” citing a poor economic environment, weak housing prices, slowing manufacturing indicators and negative regulatory environment.
Visa, the world’s biggest bank-card network, dropped 5.6 percent to $74.69 and MasterCard, the No. 2 network, declined 3.6 percent to $267.03 after the U.S. Senate rejected a six- month delay of a Fed rule capping debit-card swipe fees set by the companies.
Bulls Stand Firm
The stock market’s six-week slump hasn’t reduced bullishness among money managers and market strategists such as JPMorgan Chase & Co.’s David Kelly and Liz Ann Sonders of Charles Schwab Corp., who say profit growth and below-average valuations will lift equities this year, Bloomberg Businessweek reports in its June 13 edition.
“The economy is still growing, albeit at a slow pace, and sufficient for corporate revenues, corporate earnings and corporate cash flow to advance,” said Bob Doll, who helps oversee $3.65 trillion at New York-based BlackRock Inc., the world’s biggest money manager. “We’re at the end of the recovery and the beginning of the expansion. That’s typically a time when stocks still go up, just at a lesser pace.”
Lowe’s Cos. declined 4.9 percent to $22.26 this week. The second-largest U.S. home-improvement retailer had its recommendation cut to “neutral” from “overweight” at JPMorgan, which said earnings risk is rising. PulteGroup tumbled 11 percent to $6.93.
Sino-Forest Corp. (TRE) slipped 15 percent to $4.60. Carson Block, the short seller whose assertions of financial manipulation by Sino-Forest preceded a two-day plunge of 71 percent plunge in the forestry company’s shares last week, said he will release more research “pretty soon.”
Sealed Air Corp. (SEE) rallied the most in the S&P 500, gaining 7 percent to $23.42. Davis Selected Advisers, the company’s largest stockholder, said it may oppose the packaging maker’s proposed acquisition of Diversey Holdings Inc. (source:bloomberg.com)