U.S. Stocks Fall as S&P 500 Drops to Lowest Level Since December March 16, 2011, 1:38 PM EDT
By Rita Nazareth
March 16 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index to the lowest level since December, amid concern that Japan’s nuclear crisis will worsen and as American housing starts decreased more than estimated.
The iShares MSCI Japan Index Fund tracking 323 securities slumped 3.8 percent. KB Home and D.R. Horton Inc. slid at least 1.4 percent, pacing declines in homebuilders. International Business Machines Corp. fell 3.3 percent as Sanford C. Bernstein & Co. cut its rating on the shares. Apple Inc. sank 3 percent after JMP Securities LLC downgraded the maker of iPads.
The S&P 500 retreated 1.6 percent to 1,262.02 at 1:33 p.m. in New York, the lowest level on a closing basis since Dec. 31. The Dow Jones Industrial Average decreased 192.05 points, or 1.6 percent, to 11,663.37. IBM, which makes up about 10 percent of the 30-stock gauge, contributed 47 points to the index’s slump. Stocks extended declines following reports quoting a European energy official who said damage to reactors north of Tokyo is being underestimated.
“The risks have risen and you have to be mindful of them,” said David Joy, chief market strategist at Columbia Management in Boston, which oversees $350 billion. “It’s difficult to nail down what’s accurate information coming out of Japan and what isn’t. There’s concern that the problems at the nuclear plants are far more serious than the problems associated with the earthquake. In addition to that, there’s ongoing housing weakness in the U.S. and a fear premium built into the oil market. That’s why you have to hedge your bets.”
“Major Disaster’
Stocks extended losses after European Union Energy Commissioner Guenther Oettinger said Japan’s crippled Fukushima Dai-Ichi nuclear power plant risks provoking a ‘‘major disaster” and the site is effectively “out of control.” He said his assessment, made to a European Parliament committee today in Brussels, was based on information from the EU, the Japanese government, the IAEA and media reports.
Oettinger’s comments erased about $430 billion in value from the MSCI All-Country World Index of shares in 45 nations in less than 15 minutes, according to data compiled by Bloomberg.
The S&P 500 had slumped 1.7 percent over the last two days as Japan’s worst earthquake struck the northeast of the country on March 11. Four nuclear units in Japan have core damage, the International Atomic Energy Agency said in Vienna. Director General Yukiya Amano will travel to Japan, the agency said.
Japan’s earthquake should have a “limited” impact on U.S. growth, said Alec Phillips, a Goldman Sachs Group Inc. economist based in Washington. Disruptions to Japanese output could shift demand to U.S. products, according to Phillips.
‘Armageddon’
“Investors have priced in an Armageddon scenario,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “If we find that there’s continued stabilization coming into those nuclear facilities in Japan, investors will turn around and look at the alternatives. Industries such as energy, mining and technology look very appealing right now. People are still wary, but at the same time there’s a notion that the economic basis continues to show strength.”
U.S. stock futures fluctuated before exchanges opened as oil rose from a two-week low in New York on concern that a crackdown against protesters in Bahrain will stoke violence in the Middle East.
Equity futures fell after the Commerce Department said housing starts dropped 22.5 percent to a 479,000 annual rate. The decline from January was the biggest since March 1984. The median forecast in a Bloomberg News survey called for a 566,000 rate. Building permits, a proxy for future construction, fell 8.2 percent to a 517,000 annual pace.
Higher Energy Costs
The producer-price index climbed 1.6 percent from the prior month, the most since June 2009, Labor Department figures showed today in Washington. The median projection in a Bloomberg News survey was for a 0.7 percent gain. The so-called core measure, which excludes volatile food and energy costs increased 0.2 percent, matching forecasts.
The iShares MSCI Japan Index Fund declined 3.8 percent to $9.65, dropping to the lowest level since September on a closing basis. Qualcomm Inc., the biggest maker of mobile-phone chips, and Coach Inc., the largest U.S. maker of luxury leather handbags, slumped at least 2.4 percent amid concern Japan’s sales will suffer.
A gauge of homebuilders in S&P indexes declined, as 11 of the 12 components retreated. KB Home slumped 2.2 percent to $12.93. D.R. Horton sank 1.4 percent to $11.80.
IBM declined 3.3 percent to $153.81. The computer services company was cut to “market perform” from “outperform” at Sanford C. Bernstein.
Apple fell 3 percent to $335.23. The maker of iPads and iPhones was downgraded to “market perform” from “market outperform” at JMP Securities.
–Editors: Joanna Ossinger, Nick Baker
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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