The Standard & Poor’s 500 Index fell a third day, its longest decline in seven weeks, as European leaders clashed on ways to stem the debt crisis and data from China and Germany signaled the slowdown is deepening.
The S&P 500 fell 0.2 percent to 1,457.06 at 4 p.m. New York time. The Dow Jones Industrial Average lost 19.47 points, or 0.1 percent, to 13,560.
“There’s no magic bullet to this European crisis,” said Hayes Miller, who helps oversee about $48 billion as the Boston- based head of asset allocation in North America at Baring Asset Management Inc. “The politicians have been trying to put on a face of unity. Yet there are no easy solutions. You’re going to have an economic growth rate that’s going to be quite poor over the next year. It’s going to be a challenging environment.”
Global stocks slumped after Chancellor Angela Merkel and President Francois Hollande disagreed on a timetable for starting joint oversight of Europe’s banking sector. German business confidence unexpectedly fell in September. China’s manufacturers and retailers are less optimistic about sales than they were three months ago and are cutting jobs, according to a survey by New York-based researcher CBB International LLC.
The S&P 500 last week had the first drop since August after European Union finance ministers failed to calm concern about the region’s debt crisis. The index has advanced 16 percent this year through Sept. 21, extending the bull market rally since March 2009 to 116 percent. Better-than-estimated earnings, rising consumer confidence and home sales, and Federal Reserve stimulus in the form of record low interest rates and bond- buying programs have boosted stock prices.
“Markets seem to have lost momentum,” said Justin Urquhart Stewart, who helps oversee about $6.8 billion at 7 Investment Management in London. “Franco-German bickering over regulation, Chinese growth, employment unrest have given investors reason to take short term profits.”
The unbroken streak of S&P 500 profit growth that spurred a three-year bull market would last another quarter if not for energy companies, whose profits are poised to slump the most since 2009.
Income at oil and gas producers will fall 24 percent in the three months ending in September, the largest decline in three years, according to more than 1,200 analyst estimates compiled by Bloomberg. Excluding the retreat, earnings in the benchmark gauge for U.S. stocks would climb 2.5 percent, the 12th straight increase, amid gains for banks and computer makers, data show.
Lower earnings from Apache Corp. to Occidental Petroleum Corp. reflect the dip in oil and gas prices in May and don’t signal lasting weakness in U.S. profits after they doubled since 2009, according to BB&T Wealth Management’s Walter “Bucky” Hellwig. Bears say investors should heed the decline because energy suppliers are the fourth-biggest industry in the S&P 500 and their income reflects economic momentum.
“Over the past three years, companies have done well in growing earnings in a very challenging revenue environment,” Hellwig, who helps manage $17 billion at BB&T in Birmingham, Alabama, said in a Sept. 18 telephone interview. “For stocks as a whole, the earnings growth rate slowdown’s already been discounted. Companies will continue to generate favorable earnings and favorable earnings growth.”