By Whitney Kisling and Esmé E. Deprez May 1 (Bloomberg) -- U.S. stocks fell, breaking the Dow Jones Industrial Average’s longest winning streak since 2004, after credit downgrades for Greece, Portugal and Spain spurred concern that global economic growth will slow and prosecutors considered filing fraud charges against Goldman Sachs Group Inc. Banks dropped the most in the Standard & Poor’s 500 Index this week as the Justice Department scrutinized Goldman Sachs, which was sued by securities regulators on April 16. Goldman Sachs lost 7.8 percent, completing its biggest monthly retreat since Lehman Brothers Holdings Inc. filed for bankruptcy in 2008. Transocean Ltd. and Halliburton Co. fell more than 12 percent as an oil spill in the Gulf of Mexico worsened. The S&P 500 slumped 2.5 percent to 1,186.69. The Dow lost 195.67 points, or 1.8 percent, to 11,008.61, its first weekly decline since February. Both posted the largest weekly losses since January, when President Barack Obama proposed bank curbs. “People are now questioning if maybe the worst is not over for Greece and Portugal,” said Mark Bronzo, an Irvington, New York-based money manager at Security Global Investors, which oversees $21 billion. “The rationale is: The sovereign risk will weigh on Europe and the global economy. It’s another unknown for the stock market.” Greek Prime Minister George Papandreou said the country’s survival was at stake in talks to win a potential $159 billion European Union-led bailout in exchange for budget cuts denounced by unions as “savage.” Investors demanded 5.95 percentage points more to buy Greek 10-year bonds than German bunds amid speculation the nation will default. Beating Estimates Concern that indebted European nations will drag down global economic growth offset U.S. earnings that beat estimates. Almost 78 percent of S&P 500 companies have topped the average analyst profit forecast for the first quarter, near the highest proportion in Bloomberg data going back to 1993. Companies in the S&P 500 increased profit by 47 percent during the first quarter, according to analyst estimates compiled by Bloomberg. U.S. equities posted their biggest daily drop since February this week when S&P lowered its rating for Greece’s debt to junk, saying bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. Portugal and Spain also had their ratings reduced on budget concerns. ‘Pay For It’ “Equity investors should be very mindful of the potential for increases in global borrowing costs,” John Lynch, who helps oversee $155.5 billion as chief market analyst at Evergreen investments, said in an interview with Bloomberg Television. “We’ve had an awful lot of foreign governments create a lot of stimulus, and at some point we’re going to have to pay for it.” Quarterly reports scheduled for next week include Merck & Co., Pfizer Inc. and Kraft Foods Inc. Financial firms posted the biggest weekly fall among 10 S&P 500 industries, declining 3.8 percent as a group, as Goldman Sachs executives defended themselves during a congressional hearing and Barclays Plc reported a drop in investment-banking revenue. The U.S. Senate questioned Goldman Sachs executives about their role in marketing financial products that contributed to the worst financial crisis since the Great Depression. Federal prosecutors are weighing criminal fraud charges for Wall Street’s most profitable firm. Goldman Sachs fell 7.8 percent this week to $145.20. It plunged 15 percent in April after falling three straight weeks following the Securities and Exchange Commission’s civil lawsuit. ‘Very Difficult’ “It is very difficult to see the shares making further progress until the matter has been resolved,” Guy Moszkowski, an analyst at Charlotte, North Carolina-based Bank of America, wrote in a report yesterday. He downgraded the stock to “neutral” from “buy.” Energy companies in the S&P 500 slid the most as a group since January. London-based BP Plc fell 13 percent to $52.15 in U.S. trading. The company will have to pay the costs associated with an oil spill in the Gulf of Mexico after last week’s explosion of a well that is leaking as much as 5,000 barrels of crude a day, or five times faster than initially estimated, the Obama administration said April 29. Louisiana fisherman and shrimpers sued BP, along with Transocean and Halliburton, for environmental damage and personal injuries. Transocean owns the oil rig, and Halliburton was responsible for capping the well, according to the lawsuit. Transocean lost 20 percent to $72.32 and Halliburton retreated 12 percent to $30.65. Small Caps Sink Small companies fell more than large ones. The S&P SmallCap 600 Index fell 3.4 percent this week, the biggest drop since October. This week’s decline also ended an eight-week winning streak, which was the longest in a year. Harman International Industries Inc. had its biggest weekly drop in almost two years after forecasting a lower-than-expected profit margin, while Eastman Kodak Co. reported earnings that missed estimates and sent the shares on a 23 percent slide. Sprint Nextel Corp. fell 1.7 percent this week, ending a seven-week gaining streak, after the third-largest U.S. mobile- phone carrier posted a larger-than-expected loss, signaling it’s failing to stem customer defections to rivals. Office Depot Inc. posted a ninth straight quarter of sales declines along with earnings that fell short of projections. Shares of the second-largest U.S. office-supply retailer sank 19 percent to $6.86 for the worst weekly decline in more than a year. “Expectations really become the enemy for investors,” said Greg Woodard, portfolio strategist at Manning & Napier in Fairport, New York, which manages $28 billion. “To hit your numbers is not going to be enough in this environment. You’ll have to produce top-line and bottom-line incremental grow to continue to see the rally.” To contact the reporters on this story: Whitney Kisling in New York atwkisling@bloomberg.net; Esmé E. Deprez in New York atedeprez@bloomberg.net.U.S. Stocks Fall Most Since January on European Debt Downgrades
Saturday, 1 May 2010
Last Updated: May 1, 2010 08:00 EDT
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