S&P 500 has biggest drop of year on renewed concern about Europe
U.S. stocks fell, giving the Standard & Poor's 500 Index its biggest decline of the year, as political uncertainty in Europe fueled renewed concern about the debt crisis and American factory orders rose less than forecast.
All 10 groups in the S&P 500 fell at least 0.4 percent. Chevron Corp. lost 1.1 percent after UBS downgraded its recommendation on the stock. Wal-Mart Stores Inc. dropped 1.7 percent as JPMorgan Chase & Co. cut its rating on the stock. Herbalife tumbled 4.5 percent after a report the company is under investigation by the Federal Trade Commission.
"It's a little bit of a breather," Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.8 billion. "Italian, Spanish and Portuguese bond yields up a bit there and that's partly causing it. Nevertheless, the market in the U.S. has been strong since the beginning of the year and we don't see a whole lot to change that trend in the U.S."
The S&P 500 rallied 5 percent last month as lawmakers reached a budget compromise and companies reported better-than- estimated earnings. The Dow climbed above the 14,000-level last week for the first time since 2007, and is less than 2 percent away from its all-time high.
Yum! Brands Inc. and Sysco Corp. are among 13 companies in the S&P 500 that report earnings Monday. About 73 percent of the 259 companies from the gauge that have released results this earnings season have exceeded profit projections, and 66 percent have beaten sales estimates, according to data compiled by Bloomberg.
The Stoxx Europe 600 Index slid 1.5 percent Monday. Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank said this year's rally in Italian, as well as Spanish, bonds may falter as Italy's Silvio Berlusconi narrowed the front-runner's lead before elections this month.
Spanish 10-year government yields jumped 23 basis points to 5.44 percent. Yields on similar-maturity Italian debt rose 15 basis points to 4.47 percent.
Orders placed with U.S. factories increased less than forecast in December, reflecting a drop in non-durable goods that overshadowed gains in construction equipment and computers. Bookings climbed 1.8 percent after a revised 0.3 percent drop in November that was initially reported as unchanged, figures from the Commerce Department showed Monday in Washington. The Bloomberg survey median called for a 2.3 percent gain.
The recent rally in U.S. stocks has made the benchmark S&P 500 look overvalued given the slow pace in the country's economic recovery, Patrick Legland, Societe Generale's head of research, wrote in a note. The "risk-on mode" may end soon with a lack of positive economic data, Legland wrote.
Technology, financial and consumer-discretionary companies fell the most out of 10 S&P 500 groups, losing at least 0.9 percent.