U.S. stocks declined, giving the Standard & Poor’s 500 Index its biggest two-day drop since April, on concern Europe’s debt crisis is deepening and as a Chinese central-bank adviser said growth may slow further.
Morgan Stanley and Bank of America Corp. dropped at least 2 percent, following a tumble in European lenders, as Spanish bond yields surged on expectations regional governments may ask for aid. Freeport-McMoRan Copper & Gold Inc. slid 4.2 percent, pacing losses in commodity producers, amid concern about lower Chinese demand. McDonald’s Corp., the world’s largest restaurant chain, fell 2.8 percent as profit trailed estimates.
The S&P 500 lost 1.8 percent to 1,337.83 at 10:16 a.m. New York time. The benchmark index is down 2.8 percent over two days. The Dow Jones Industrial Average slipped 227.27 points, or 1.8 percent, to 12,595.30. Trading in S&P 500 companies was up 16 percent from the 30-day average at this time of day.
“Investors are on edge,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc. His firm oversees $3.56 trillion. “Chinese growth has slowed. It’s not clear that the existing firewalls in Europe are large enough. We knew the Spanish regional governments had debt. The question is how bad is it? What other skeletons are going to fall out of the closet?”
Stocks joined a global slump before the arrival in Athens tomorrow of Greece’s troika of international creditors -- the European Commission, the European Central Bank and the International Monetary Fund. In Spain, Catalonia joined a list of regions that may tap aid from the central government. Spain’s 10-year yields surged above 7.5 percent for the first time.
Chinese Economy
Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, predicted the nation’s expansion may cool to 7.4 percent this quarter. He also warned that a decline in producer prices in tandem with consumer inflation may hurt investment returns of industrial companies.
Investors also watched corporate results. Sales rose an average 3 percent in the second quarter among 123 members of the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Only 41 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.
All 10 groups in the S&P 500 retreated today. The Morgan Stanley Cyclical Index of companies most-dependent on economic growth lost 2.1 percent. Morgan Stanley dropped 3.6 percent to $12.33. Bank of America sank 2 percent to $6.93. Freeport- McMoRan, the biggest publicly traded copper producer, slipped 4.2 percent to $32.35.
Budget Conscious
McDonald’s slipped 2.8 percent to $89.04. Chief Executive Officer Don Thompson, who took the helm earlier this month, has struggled to lure budget-conscious Americans with a new extra- value menu. Sales at stores open at least 13 months in the U.S. rose 3.6 percent, the slowest growth in five quarters.
Apple Inc., the world’s largest company by market value, lost 2.4 percent to $589.99. Tomorrow, it will probably report profit grew 35 percent to $9.86 billion, according to the average of analysts’ estimates compiled by Bloomberg. Sales are projected to rise 31 percent to $37.3 billion. While that kind of growth would outpace gains by most of Apple’s technology peers, it would be the company’s slowest since 2009.
Facebook Inc. dropped 2.2 percent to $28.14. The largest social-networking service is getting its first crack as a public company this week to allay the growth concerns that have made it the second-worst performing U.S. technology initial public offering of 2012. Executives will hold a conference call July 26 to discuss second-quarter results.
Dorm Room
Sales probably rose 30 percent to $1.16 billion in the June period, according to analyst predictions compiled by Bloomberg. That would be the slowest growth rate yet disclosed by the company co-founded by Mark Zuckerberg in 2004 in a Harvard University dorm room.
RailAmerica Inc. jumped 9.4 percent to $27.15. Genesee & Wyoming Inc. agreed to purchase the short-line railroad controlled by Fortress Investment Group LLC for $1.39 billion to combine North America’s two largest short-line and regional rail operators.
U.S. shares of Nexen Inc. surged 53 percent to $26.06. Cnooc Ltd. agreed to pay $15.1 billion in cash to acquire Calgary-based Nexen in the biggest overseas acquisition by a Chinese company.
Weaker Sales
Better-than-forecast earnings are masking weaker sales growth in the most recent quarter as U.S. companies including International Business Machines Corp. improve margins to top estimates.
The gap in results signals companies may hold off hiring and expanding until demand rebounds globally. Federal Reserve Chairman Ben S. Bernanke told lawmakers last week that progress in reducing unemployment may be “frustratingly slow” with joblessness stuck above 8 percent since February 2009.
Analysts have lowered predictions for profit and revenue in recent months. For earnings, they estimate a 1.6 percent decline on average among all S&P 500 members after anticipating a 0.5 percent increase in May. Revenue may rise 1.8 percent on average, down from a 3.7 percent estimate in May.
“People are sitting on the sidelines right now waiting to see what happens,” Verizon Communications Inc. Chief Financial Officer Fran Shammo said in a telephone interview last week after the New York-based company reported in-line second-quarter profit and sales. “This isn’t helping with growth, so I think we will continue to mosey along here in the states.”
© Copyright 2013 Bloomberg News. All rights reserved.