U.S. Stocks Fall as Investors Watch for Signs on Europe Crisis

By Rita Nazareth - Oct 5, 2011 8:41 PM GMT+0700
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Yahoo! Inc. climbed 2.3 percent after a report that the company is preparing to send financial information to potential buyers. Photographer: Scott Eells/Bloomberg

U.S. stocks fell, following yesterday’s rally in the Standard & Poor’s 500 Index, as investors watched for signs Europe was making progress to contain its debt crisis.

Financial companies had the biggest decline in the S&P 500 among 10 industries. Bank of America Corp. and Citigroup Inc. lost more than 3.3 percent. Apple Inc. (AAPL), the world’s largest technology company, slumped 1.9 percent, dropping for an eighth straight day. Home Depot Inc. (HD), the largest U.S. home improvement retailer, and Advanced Micro Devices Inc. slid at least 2 percent after analysts cut their recommendations.

The S&P 500 fell 0.6 percent to 1,116.76 at 9:39 a.m. New York time. The index jumped 2.3 percent yesterday after plunging more than a 20 percent intraday from an April peak, the threshold of a bear market. The Dow Jones Industrial Average dropped 58.80 points, or 0.5 percent, to 10,749.91 today.

“The jury is still out,” Bruce Bittles, who helps oversee $85 billion as chief investment strategist at Milwaukee-based Robert W. Baird & Co., said in a telephone interview. “The market’s ability to continue to rally will depend on whether the economy will slip into recession or continue in slow growth pace. There’s no easy, painless solution out of the European situation. It’s complicated.”

Stocks reversed losses in the final hour of trading yesterday after a report in the Financial Times quoted Olli Rehn, European commissioner for economic affairs, as saying there is an “increasingly shared view” that the region needs a coordinated approach to halt the sovereign debt crisis. The European Union doesn’t have a new plan to recapitalize banks, the European Commission said today.

‘Bad Bank’

The International Monetary Fund said EU officials are working on plans to boost bank capital. France and Belgium said a “bad bank” will be set up to hold Dexia SA’s troubled assets. Moody’s cut Italy’s grade for the first time in almost two decades.

Equities futures briefly rose as data from ADP Employer Services showed companies in the U.S. added 91,000 jobs in September. The median forecast of economists surveyed by Bloomberg News called for an advance of 75,000. Service industries in the U.S. probably expanded in September at a slower pace, showing the recovery is struggling to gain speed, economists said before data due 10 a.m.

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