All 10 groups in the S&P 500 fell as financial, industrial and commodity shares had the biggest losses. Alcoa Inc. (AA), Caterpillar Inc. and Bank of America Corp. decreased more than 3.2 percent. The Morgan Stanley (MS) Cyclical Index of companies most-dependent on economic growth slumped 2.7 percent as 29 of its 30 stocks retreated. Merck & Co. (MRK) dropped 2.6 percent as the drugmaker’s profit forecast trailed analysts’ projections.
The S&P 500 decreased 1.5 percent to 1,343.36 at 4 p.m. New York time, falling the most since Dec. 8. The Dow Jones Industrial Average slid 203.66 points, or 1.6 percent, to 12,759.15. About 7.5 billion shares changed hands on U.S. exchanges, or 12 percent above the three-month average.
“Investors typically dislike uncertainty more than they dislike bad news,” Michael Koskuba, who helps oversee $28 billion at Victory Capital Management Inc. in New York, said in a telephone interview. “There’s concern about whether or not there will be enough participants in the Greek debt swap. The fear is that if it doesn’t happen the way most want it to happen, there’s potential for a greater recession in Europe.”
The MSCI All-Country World Index (MXWD) lost 2.1 percent for its biggest drop since November. Private investors that so far declared their participation in Greece’s debt restructuring hold about one-fifth of the bonds involved in a swap, which ends March 8, required for a bailout.
Economic Concern
Concern about a global slowdown increased a day after China cut its economic growth target. Data today showed that Europe’s economy shrank 0.3 percent last quarter and Brazil (BZGDGDP4)’s growth last year had its second-worst performance since 2003. The reports intensified bets that a rally that took the S&P 500 to an almost four year-high last week has outpaced economic prospects.
“I’m watching this market suffer,” said Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “The market has more questions than answers. That makes investors nervous at these relatively lofty index levels.”
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, advanced 16 percent to 20.87.
Twenty-nine out of the Dow’s 30 stocks retreated today, led by companies whose earnings are most-tied to economic growth. Alcoa, the largest U.S. aluminum producer, dropped 4.1 percent to $9.47. Caterpillar (CAT), the world’s biggest maker of construction and mining-equipment, lost 3.8 percent to $105.93.
Banks Tumble
Financial companies had the biggest decline in the S&P 500 among 10 groups today, falling 2.5 percent. Bank of America retreated 3.3 percent to $7.71. Citigroup Inc. (C) dropped 4.6 percent to $32.12. Morgan Stanley tumbled 5.3 percent to $17.32.
Merck & Co. fell 2.6 percent to $37.44. Earnings excluding one-time items will be 95 cents to 98 cents a share in the first quarter, Merck said. That was less than the $1.01 average of 17 analyst estimates compiled by Bloomberg. Based on an exchange rate of $1.31 per euro, revenue will take a 1 percent to 2 percent hit from currency, the company said today.
Apple Inc. (AAPL) lost 0.5 percent to $530.26, extending its two- day decline to 2.7 percent. The company, which topped $500 billion in market capitalization for the first time last week, will hold a product event tomorrow in San Francisco, where it’s said to be releasing the third generation of its best-selling iPad tablet computer.
Weight Loss
Nutrisystem Inc. (NTRI) tumbled 11 percent to $10.58. The provider of prepared meals to help clients lose weight forecast annual earnings per share of no more than 55 cents, falling short of the average analyst projection of 92 cents a share, data compiled by Bloomberg show.
Monster Worldwide Inc. (MWW) added 11 percent to $8.32. The online recruiting service hired Stone Key Partners LLC and Bank of America Corp. (BAC)’s Merrill Lynch to help it review strategic alternatives.
OmniVision Technologies Inc. (OVTI) rose 8.4 percent to $17.16. The primary supplier of camera sensors for Apple’s iPhone 4S was upgraded to outperform from neutral at Robert W. Baird & Co., which cited research showing the company may be a supplier of sensors for Apple’s iPad3.
Hedge funds gained 0.8 percent in February, underperforming equities around the world, which climbed on expectations Europe would tame its debt crisis.
The Bloomberg aggregate hedge fund index increased to 117.16 from 116.25 in January as long-short equity, multistrategy and global macro funds climbed.
Protection Concern
“In February they did well but not as well as you would have expected them to do based on the capital markets,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “That’s attributable to the fact that the average hedge fund manager was more concerned with protecting downside than capturing upside.”
The MSCI All-Country World Index (MXWD) rose 5.1 percent including dividends in February amid better-than-estimated economic reports, including one that showed employment in the U.S., the world’s largest economy, topped forecasts, and optimism that Greece would receive a second bailout. Hedge funds fell 5.2 percent last year as concerns grew that Europe’s debt crisis couldn’t be contained and stocks experienced sharp price swings.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
http://www.bloomberg.com/news/2012-03-06/u-s-stock-index-futures-drop-as-european-economy-shrinks-verifone-falls.html
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