U.S. stocks sank, sending the Standard & Poor’s 500 Index to the biggest slump since August, amid concern that the debt crisis in Ireland and Greece is worsening and that China will act to slow its economy.
Freeport-McMoRan Copper & Gold Inc. and Nucor Corp. fell at least 3.5 percent as metals plunged. Travelers Cos. dropped 3.6 percent, leading losses in the Dow Jones Industrial Average as it slipped below 11,000 for the first time in a month, after declines in municipal bonds hurt its investments. Regions Financial Corp. slumped 4.5 percent after three executives overseeing risk and souring assets at the bank quit.
The S&P 500 decreased 1.6 percent to 1,178.34 at 4 p.m. in New York. The drop follows a late-day selloff yesterday triggered by growing criticism of the Federal Reserve’s plan to spur growth using a technique called quantitative easing. The Dow fell 178.47 points, or 1.6 percent, to 11,023.50. The MSCI World Index of shares in 24 developed nations slumped for a seventh straight day, the longest losing streak since January.
“It will be a choppy ride before we find some footing,” said Burt White, who helps oversee $284 billion as chief investment officer at LPL Financial Corp. in Boston. “The market is really trying to get its arms around a few lingering questions -- China, Europe, or whether or not QE2 is going to work or if it’s even necessary.”
Restraining Prices
The S&P 500 slid to the lowest level since Oct. 20 after the China Securities Journal reported that the country will introduce measures to control rising food prices in the world’s fastest-growing major economy. Equities extended losses as Austria threatened to block its next transfer of financial rescue funds to Greece.
The Fed has begun a second round of quantitative easing, known by investors as QE2, with plans to buy as much as $600 billion of Treasuries in coming months to lower long-term interest rates and boost the economy.
Fed Bank of Boston President Eric Rosengren said today in an interview with Bloomberg News that he expects the central bank to buy the entire $600 billion of Treasuries authorized Nov. 3, while St. Louis Fed President James Bullard said there’s a possibility that all of the purchases may not be needed or the Fed could even add to the easing program.
On U.S. stock exchanges, 5.7 companies fell for each that rallied, the most since Oct. 19, according to data compiled by Bloomberg. Declines in the 10 main S&P 500 industries ranged between 2.2 percent for raw-material companies and 1.1 percent for consumer staples.
Freeport, Nucor
Freeport, the largest publicly traded copper producer, slumped 4.3 percent to $97.61. Nucor, the biggest U.S. steelmaker, sank 3.5 percent to $37.97.
Stocks also fell on growing concern that Europe’s debt crisis is worsening.
Ireland is in talks with European and International Monetary Fund officials about a bailout that would enable it to inject capital into the country’s banks, said a European official with direct knowledge of the talks. The two-part funding package would mean Ireland wouldn’t have to tap the bond market for an extended period as it tries to cut the budget deficit, said the person, who spoke on condition of anonymity.
“Concern about China tightening and the Ireland debt situation is hitting sentiment big-time,” said Michael Mullaney, who helps manage $9.5 billion at Fiduciary Trust Co. in Boston. “We’re in the middle of a pullback.”
Austria Threat
Stocks extended declines as Austria threatened to block its next transfer of rescue funds to Greece unless the government gets a deficit-cutting plan back on track.
“We are getting indications that the Greeks can’t stick to their plan in a sufficient manner, in particular on the revenue side,” Finance Minister Josef Proell said, according to a government e-mail that confirmed remarks made after a cabinet meeting today. “The data we have at the moment doesn’t give any reason to approve the December tranche from the Austrian point of view.”
Travelers sank 3.6 percent to $54.73 after a selloff in municipal bonds. The New York-based insurer held municipal debt valued at $41.4 billion at the end of third quarter.
Regions Financial dropped 4.5 percent to $5.92. The lender said Chief Risk Officer Bill Wells resigned. The Birmingham, Alabama-based company also said Michael Willoughby, director of credit risk, retired and Tom Neely, head of problem asset management, left the company. Chief risk officer duties are being divided between Barb Godin and John Haley.
Wal-Mart, Home Depot
Wal-Mart Stores Inc. rose 0.6 percent to $54.26 after the world’s largest retailer reported a 9.3 percent gain in third- quarter profit as growth abroad helped make up for sales declines at U.S. stores.
Home Depot Inc. advanced 1 percent to $31.71 after reporting third-quarter profit that topped analyst estimates and increasing its earnings forecast for the year after curbing expenses.
U.S. closed-end funds fell the most in five months as a weeklong selloff in stocks and bonds convinced buyers they were paying too much for the assets that underlie the investment products.
The S-Network Composite Closed-End Fund Index lost 1.7 percent, the biggest retreat since June 4 and its seventh day of declines, data compiled by Bloomberg show. John Hancock Investors Trust dropped 6.3 percent, the most since Nov. 21, 2008, and Pimco Corporate Income Fund fell 3.7 percent, the biggest decrease since May 6.
Closed-end mutual funds, unlike their open-ended competitors, sell common shares to investors that are publicly traded on exchanges and often borrow to boost returns. The tumble over the last week reflected declines in their holdings as well as a widening discount in the funds’ market price compared with the value of the assets they own.
“It’s like a fire spreading,” said Richard A. Barone, chairman of Cleveland-based The Ancora Group Inc. which manages about $3 billion. “There’s a general sense that risk is coming back into to certain areas of the bond market, and perhaps that we’ve come to the end of the line in terms of interest rates coming down. So there’s profit-taking going on.”
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.
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