US stocks slumped, sending the Standard & Poor’s 500 Index down for a sixth straight day, as the cost of insuring European government debt against default rose to a record on concern the region's crisis is worsening.
About 10 stocks fell for each that rose on US exchanges. Alcoa Inc slid 3.5 per cent amid concern about slower demand for commodities as a preliminary gauge indicated China's manufacturing shrank by the most since March 2009. Bank of America Corp and Citigroup Inc sank at least four per cent. Deere & Co rallied 3.7 per cent as the largest farm-equipment maker reported profit that topped analysts' projections.
The S&P 500 declined 1.8 per cent to 1,166.39 at 11.22 am New York time, the lowest intraday since October 10. The gauge tumbled 7.3 per cent in six days, the most since Aug. 10 on a closing basis. The Dow Jones Industrial Average lost 189.66 points, or 1.7 per cent, to 11,304.06. US equity markets will be closed tomorrow for the Thanksgiving holiday and will end trading at 1 pm November 25.
"There's a lot of negativity," Uri Landesman, who helps oversee more than $1 billion as managing general partner of New York-based hedge fund Platinum Partners LLP, said in a telephone interview. The rise in bond yields in Europe shows that "everybody thinks they are going bust. I'm hoping this is a sign that everybody is so negative that the odds are the next move is going to be positive."
The debt crisis that began more than two years ago now risks engulfing Germany. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose to an all- time high as Germany failed to find buyers for 35 per cent of the bonds offered at an auction.
ECONOMIC DATA
Equities also fell after reports indicated more signs of a slowing American economy. Consumer spending rose less than forecast in October, while orders for durable goods sank. More Americans than forecast filed for unemployment benefits last week. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for November rose to 64.1, less than economists estimated.
Stocks tumbled yesterday, driving the S&P 500 to its longest slump in almost four months, as slower-than-estimated economic growth overshadowed signs the Federal Reserve may provide more stimulus.
All 10 groups in the S&P 500 fell as commodity and financial shares had the biggest declines. The Morgan Stanley Cyclical Index of companies most-dependent on economic growth lost 2.4 per cent, while the Dow Jones Transportation Average sank 2.3 per cent. The KBW Bank Index (BKX) of 24 stocks lost 2.8 per cent amid concern about a global financial crisis.
CAPITAL TESTS
Bank of America lost 4 per cent to $5.16, while Citigroup decreased 4.3 per cent to $23.42. Both are among lenders that may have to temper plans to raise dividends and buy back stock next year as the Federal Reserve toughens capital tests for the biggest US banks.
The Fed imposed a tougher capital test on the 31 largest US banks yesterday, releasing the criteria for measuring their wherewithal if the US economy sours and major trading partners default on their debt. Lenders need to prove they have the capital to withstand a "severe" US recession with 13 per cent unemployment and an 8 per cent decline in gross domestic product before they can increase dividends or repurchase shares.
Raw material shares had the biggest decline in the S&P 500 among 10 industries, dropping 2.6 per cent. JPMorgan Chase & Co. downgraded commodities to "underweight," citing policy failures in the US and Europe. Alcoa sank 3.5 per cent to $8.94. Halliburton Co. (HAL) fell 4 per cent to $32.35.
BIG LOTS
Big Lots Inc. (BIG) fell the most in the S&P 500, sliding 6.2 per cent to $36.37. The discount retailer was cut to "equalweight" from "overweight" at Barclays Plc, which said the company's fourth-quarter sales and margins "could be disappointing."
Deere rallied 3.7 per cent to $74.61 as it also forecast 2012 earnings that topped projections. The company, led by Chief Executive Officer Sam Allen, has benefited as US farmers used cash from rising corn and soybean prices to buy high-horsepower equipment. US farm income will jump 31 per cent this year to a record $103.6 billion, the US Department of Agriculture said in August.
Boston Scientific Corp. (BSX) rose 2.5 per cent to $5.44 after gaining US approval for a new version of its drug-coated heart stent. The second-biggest heart-device maker by revenue will immediately begin manufacturing and selling the Promus Element stent system, the Natick, Massachusetts-based company said in a statement late yesterday.
