U.S. stocks fall on China slump, impact of possible stimulus cut

Volatility Gauge

The Chicago Board Options Exchange Volatility Index jumped 10% to 18.9 for the week. Even after the gauge of options prices on the S&P 500 increased 67% since March, it would have to rise 134% more to reach its average high of 44 from 2009 to 2012, according to data compiled by Bloomberg. VIX futures expiring in six months trade only 10% higher than the index. The gauge added 4.4% to 19.74 today.

Eight of the 10 S&P 500 main industries retreated as financial, industrial and materials shares tumbled more than 1.4%. Bank of America dropped 2.9% to $12.33. Citigroup slipped 2.9% to $45.53.

Metal and coal producers retreated amid growing concern over the economic sustainability in China, the world’s largest consumer of commodities from iron ore to coal. Declines accelerated after the U.S. Supreme Court agreed to consider reviving an Environmental Protection Agency rule that would curb emissions from coal-fired power plants, in a clash over the Obama administration’s biggest air-quality effort.

Metals, Ore

Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, declined 7.6% to $15.88. Alpha Natural Resources Inc., the biggest U.S. supplier of metallurgical coal, declined 7.9% to a record $5.06 and Peabody Energy Corp. slipped 7.2% to $14.85.

Apple dropped 2.2% to $404.46, the fifth straight decline for the stock. A glut of unsold iPhones prompted Jefferies & Co. analyst Peter Misek to lower its target price to $405 from $420. Apple shares have fallen 24% this year.

Allergan plunged 11% to $82.10. Deutsche Bank AG downgraded the maker of the Botox wrinkle treatment to hold from buy and Leerink Swann LLC trimmed its recommendation to market perform from outperform.

Vanguard Health Systems jumped 68% to $20.79. Tenet will pay $21 a share in cash for the Nashville, Tennessee-based hospital operator and will assume $2.5 billion of Vanguard debt, the companies said in a joint statement. Tenet advanced 5.2% to $44.01 for the biggest gain in the S&P 500.

High-yielding stocks performed best, as Treasury yields slipped from the 22-month high. Utilities and consumer-staple companies added 0.5% and 0.1%, respectively. Phone companies, which yield 4.5% for the most among 10 S&P 500 industries, fell less than 0.1%, trimming an earlier 1.5% decline.

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