U.S. Stocks Fall as Energy, Financials Tumble on Economy

By Lindsey Rupp & Nikolaj Gammeltoft
U.S. stocks fell, dragging the Standard & Poor’s 500 Index down from a record, as financial and energy shares tumbled after oil plunged and worse-than-estimated data spurred concern over economic growth.

Bank of America Corp. and Morgan Stanley dropped more than 2.7 percent as financial shares tumbled the most among 10S&P 500 groups. Energy companies sank as oil prices slid the most in more than four months after inventories climbed. An S&P gauge of homebuilders fell 3.3 percent, with PulteGroup Inc. slipping 4.3 percent. Zynga Inc. rallied 15 percent after saying it will introduce real-money online gambling in the U.K.

The S&P 500 fell 1.1 percent to 1,553.69 at 4 p.m. in New York, for the biggest decline since Feb. 25. The Dow Jones Industrial Average lost 111.66 points, or 0.8 percent, to 14,550.35. TheRussell (RTY) 2000 Index dropped 1.7 percent to 918.71, extending its loss for the week to 3.5 percent. About 7.2 billion shares changed hands on U.S. exchanges, 14 percent above the three-month average.

“The two data points that came in below expectations have spooked the equity markets today,” Chad Morganlander, aFlorham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., said in a phone interview. His firm oversees about $130 billion of assets. “People are focused on Friday’s jobs report and the ADP number made investors more skittish.”

Companies boosted employment by 158,000 workers in March, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 39 economists surveyed by Bloomberg called for a 200,000 gain.

Jobs Report

The data come before the non-farm payrolls report from the Labor Department on April 5, which may show employers hired a net 195,000 workers for the month, according to the median forecast of 87 economists surveyed by Bloomberg.

The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers almost 90 percent of the economy, fell to 54.4 in March from 56 in the prior month, the Tempe, Arizona-based group said today. The median forecast of 73 economists surveyed by Bloomberg was 55.5. Readings above 50 signal expansion. The survey covers industries ranging from utilities and retailing to housing, health care and finance.

U.S. benchmark equity gauges rose to their highest closes ever yesterday as concern overEurope’s debt crisis eased and U.S. factory orders topped forecasts. The S&P 500 rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market, according to data compiled by Bloomberg.

Earnings Season

Investors will begin to focus on first-quarter earnings reports beginning next week, with Alcoa (AA)Inc. scheduled on April 8 to be the first company in the Dow to report results. Profits among S&P 500 companies are forecast to decline 1.9 percent for the period, for the first retreat since 2009, according to estimates compiled by Bloomberg. In January, analysts forecast earnings growth of 1.2 percent. Profit expanded by 8 percent in the fourth quarter of 2012.

The Chicago Board Options Exchange Volatility Index (VIX), which measures the cost of using options as insurance against losses, jumped 11 percent to 14.21 today. The gauge, known as the VIX, is down 21 percent for the year.

Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index (CYC) down 1.4 percent and the Dow Jones Transportation Index (TRAN) 1.3 percent lower. Intel Corp. declined 1.9 percent to $21.05 and General Electric Co. retreated 1.5 percent to $23.

The KBW Bank Index (BKX) slumped 2 percent as all 24 of its members declined. Bank of America lost 2.8 percent to $11.81. Morgan Stanley fell 2.7 percent to $21.11. JPMorgan Chase & Co. slipped 2.4 percent to $46.85.

Commodities Plunge

Oil and metals led the S&P GSCI index of 24 commodities to a 2 percent drop, the largest decline since November. Crude registered its biggest drop of the year, falling 2.8 percent to $94.45 a barrel, after a government report showed that U.S. oil stockpiles climbed to the highest level in more than 22 years. Gold futures sank 1.4 percent, to the lowest since June and on the brink of a bear market.

Energy (S5ENRS) companies declined 1.6 percent as a group. Exxon Mobil Corp. slumped 0.7 percent to $89.93 and Chevron Corp. tumbled 1 percent to $117.78.

Phillips 66, the largest U.S. independent refiner by revenue since its spinoff from ConocoPhillips last year, dropped 6.6 percent to $62.46. Tesoro Corp., the independent petroleum refiner based in San Antonio, slid 5 percent to $52.26 and Marathon Petroleum Corp. declined 4.8 to $81.39.

EPA Rules

Refiners (S5OILR) in the S&P 500 have tumbled more than 10 percent as a group this week, their worst slump since 2011, after the Environmental Protection Agency proposed rules aimed at cutting the sulfur in gasoline. The EPA said its standards will prevent as many as 2,400 premature deaths annually by 2030. The rules will require an additional $10 billion in infrastructure investment and $2.4 billion in annual operating costs, according to the American Fuel & Petrochemical Manufacturers trade group.

All of the 11 stocks in the S&P Supercomposite Homebuilding Index retreated. The ADP payroll report showed no jobs growth in the construction industry in March. The index has fallen 9.8 percent since reaching a five-year high on March 20. KB Home (KBH), the best-performing stock among U.S. homebuilders this year, fell 5.5 percent to $20.02 today. PulteGroup slipped 4.3 percent to $19.01.

The Bloomberg U.S. Airlines Index (BUSAIRL) capped its biggest three- day decline since October 2011, falling an additional 2.1 percent today. Nine of the 10 companies in the index slid, as Delta Air Lines Inc. dropped 2.5 percent and United Continental Holdings Inc. erased 2.5 percent to $28.66.

ConAgra Falls

ConAgra Foods Inc., the Omaha, Nebraska-based packaged- foods manufacturer, slipped 1.9 percent to $34.85 after it reported third-quarter earnings that missed analysts’ estimates. Operating profit from consumer foods fell to $284.4 million from $331.3 million for the same period a year ago.

Global Payments Inc. (GPN) lost 9.2 percent to $44.52. The bank- card processor said revenue was $578.7 million in the three months that ended in February, compared with the average analyst estimate of $581 million.

Zynga, which makes games for Facebook Inc.’s social network, rose 15 percent to $3.53. The company said the two new real-money games, called “ZyngaPlusPoker” and “ZyngaPlusCasino,” will be available to players in the U.K. from today. Facebook added 3.3 percent to $26.25.

To contact the reporters on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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