U.S. stocks fell, erasing this year’s gains for the Standard & Poor’s 500 Index (CME:ESM14), as weaker-than-forecast data from China and tension in Ukraine overshadowed reports showing an improving American economy.
United Technologies Corp., Pfizer Inc. and American Express Co. tumbled more than 2.4% to lead declines in the Dow Jones Industrial Average. An S&P gauge of homebuilders lost 3.2%, falling for a seventh straight day. Dollar General Corp. slipped 3.2% as it forecast earnings below analyst estimates.
The S&P 500 fell 1.3% to 1,844.67 at 3:29 p.m. in New York. The benchmark index reversed earlier gains after climbing to within four points of its closing record of 1,878.04 reached on March 7. The Dow dropped 238.67 points, or 1.5%, to 16,101.41. Both gauges are poised for their biggest decline since Feb. 3. Trading in S&P 500 stocks was 4% above the 30-day average at this time of day.
“People have certainly moved on to worrying about global issues and a lot less about domestic ones,” Jeffrey Kleintop, Boston-based chief market strategist at LPL Financial LLC, which manages $414.7 billion, said in a phone interview. “The market is clearly focused on the Ukraine situation today, which could further contribute to volatility tomorrow.”
The S&P 500 has declined 1.6% this week, sending the index to a 0.2% loss for the year, amid concerns that China’s economy is slowing and the crisis in Ukraine is escalating.
The U.S. and Germany stepped up pressure on Russia to back down from plans to annex Crimea from Ukraine after the region holds a referendum in three days, warning they’ll exact an economic toll if Russia doesn’t.
Secretary of State John Kerry told a Senate panel in Washington that the U.S. and Europe will take “very serious” steps the day after the vote “if there is no sign” of a resolution to the crisis.
China’s industrial-output, investment and retail-sales growth cooled more than estimated in January and February, data showed today. China announced an economic growth target of 7.5% last week, the weakest since 1990, and had its first onshore bond default after a solar-panel maker failed to make an interest payment.
“Ongoing concerns about China’s growth and the fluid situation in Ukraine continue to linger on markets,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said. “As Kerry meets with his Russian counterpart tomorrow in a last ditch effort to divert the referendum, markets could be a little jittery, and we might be seeing some of that play out today as well.”
Global concerns overshadowed better-than-forecast data in the U.S. Retail sales rose in February for the first time in three months, as Americans ventured out to shop last month even as colder-than-normal temperatures and severe snowstorms blanketed parts of the U.S. A separate report showed a drop in unemployment benefits for the latest week, indicating further improvement in the labor market.
The government’s monthly jobs report last week showed U.S. employers added more workers than estimated in February. The Federal Reserve is trying to determine how much recent economic data has been affected by weather.
“The lingering question has been how disruptive this deep freeze has been to the economy,” James Dunigan, who helps oversee $127 billion as chief investment officer in Philadelphia at PNC Wealth Management, said by phone. “As we come out of this deep thaw, if we get some better, more clear data on the underlying trend, we’re going to see that the economy is continuing to gain momentum.”
The S&P 500 rallied to all-time highs this year as Fed Chair Janet Yellen said the U.S. economy was strong enough to withstand measured reductions to the central bank’s monthly bond purchases. Three rounds of Fed stimulus have helped push the S&P 500 up 173% from a 12-year low, as U.S. equities begin the sixth year of a bull market that started March 9, 2009.
The Federal Open Market Committee, which meets March 18-19, has cut monthly bond buying to $65 billion from $85 billion in December. Policy makers have indicated they plan to taper by $10 billion at each meeting absent a weakening in the economy.
“After last Friday’s employment numbers, we believed they were worthy of the FOMC continuing to take $10 billion off the table every month,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “After the March 18-19 meeting, we should be at $55 billion a month.”