BLBG: U.S. Stocks Retreat on Spanish Bond Sale, Fed Minutes
U.S. stocks fell, with the Standard & Poor’s 500 Index headed for this year’s second-worst decline, as demand dropped at a Spanish bond auction and the Federal Reserve signaled it may refrain from more monetary stimulus.
Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) slumped at least 3 percent, driving financial shares to the biggest loss among 10 groups in the S&P 500. SanDisk Corp. (SNDK), the biggest maker of flash-memory cards, tumbled 9.3 percent after cutting its forecast for first-quarter sales and profitability. General Electric Co. (GE) slid 1.4 percent after its debt rating was cut by Moody’s Investors Service.
The S&P 500 slumped 1.2 percent to 1,396.4 at 11:25 a.m. New York time, poised for the biggest retreat since March 6, when the benchmark index plunged 1.5 percent in its worst loss of the year. The Dow Jones Industrial Average slipped 156.36 points, or 1.2 percent, to 13,043.19.
The Spanish auction “serves as the reminder to the market that Europe is still with us,” Mark Freeman, chief investment officer at Westwood Holdings Group Inc. in Dallas, said in a telephone interview. His firm oversees about $13 billion. “We still have a long way to go before things get worked out,” he said. “The market has now moved significantly higher. But guess what, expectations are now much higher. It’s going to take more than just good data now to take the market higher.”
Fed Minutes
The S&P 500 dropped 0.4 percent yesterday as the minutes of the March 13 meeting of the Federal Open Market Committee showed a decreased urgency for further monetary stimulus. The Fed will refrain from increasing monetary accommodation unless economic expansion falters or prices rise at a rate slower than its 2 percent target. The S&P 500 rallied to its highest level since May 2008 on April 2 after a gauge of U.S. manufacturing climbed more than estimated.
Spain sold 2.59 billion euros ($3.4 billion) of bonds at an auction today, the Bank of Spain said. That was less than the maximum target of 3.5 billion euros. It auctioned 973 million euros of five-year notes at an average yield of 4.32 percent. Investors bid for 2.46 times the amount of debt allotted. That compared with a bid-to-cover ratio of 2.59 at the previous auction of the securities on March 1.
Stocks extended losses today after a report showed service industries in the U.S. expanded less than forecast in March as orders grew at the slowest pace in three months. The Institute for Supply Management’s non-manufacturing index dropped to 56 from a one-year high of 57.3 in February. Readings above 50 signal expansion, and economists surveyed by Bloomberg News projected 56.8 for the gauge, according to the median estimate.
‘Excuse to Pause’
Employment increased by 209,000 for the month after a revised 230,000 gain in February, figures from ADP Employer Services showed today. The median estimate in the Bloomberg News survey called for a 206,000 increase.
“It doesn’t matter what the news is today, I don’t think it’ll stem a decline,” Richard Weeks, the Vienna, Virginia- based managing director and partner at HighTower’s VWG Wealth Management. His firm oversees more than $20 billion. “The market is showing signs that it’s ready for a little consolidation. You could make a case that the market is looking for an excuse to pause and digest some of its gains.”
Financial shares fell the most among 10 groups in the S&P 500, dropping 1.9 percent. Bank of America slumped 3.2 percent to $9.19 while JPMorgan Chase declined 3 percent to $44.07.
SanDisk Drops
SanDisk sank 9.3 percent, the most in the S&P 500, to $45.40 after predicting revenue in the quarter that ended April 1 of about $1.2 billion. That compared with an earlier forecast for sales of $1.3 billion to $1.35 billion. Gross margin, a measure of profitability, will be less than the company’s previous prediction of 39 percent to 42 percent, SanDisk said.
Micron Technology Inc. (MU), the largest U.S. maker of computer memory, tumbled 5.8 percent to $7.53.
GE, the maker of jet engines, power generation equipment, health-care imaging equipment and locomotives, fell 1.4 percent to $19.68. Moody’s lowered its rating on the company one level to Aa3 and its rank on GE Capital Corp. two steps to A1 because of “heightened risk” from its finance unit. Moody’s previously assigned ratings of Aa2 to both entities.
Chevron Corp. (CVX), the second-biggest U.S. oil producer, slipped 1.7 percent to $105.28, while Transocean Ltd., the biggest operator of offshore drilling rigs, dropped 2.8 percent to $52.16.
A Brazilian federal prosecutor sued the two companies for 20 billion reais ($11 billion) over a second oil spill at the Frade field off the nation’s coast. Prosecutors filed a 20 billion-reai lawsuit last year following the first spill at project -- a 3,000-barrel leak in November.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
