U.S. stocks declined, sending the Standard & Poor’s 500 Index down for a second day, on concern Europe’s sovereign-debt crisis will spread and as U.S. lawmakers failed to agree on a deficit-reduction program.
U.S. banks from JPMorgan Chase & Co. (JPM) to Bank of America Corp. (BAC) dropped as Italian and Spanish government bonds tumbled. Alcoa Inc. (AA) retreated 2.2 percent. General Motors Co. (GM) fell 2.1 percent after Renault SA predicted declining sales in Europe this year.
The S&P 500 retreated 1.1 percent to 1,328.69 at 9:34 a.m. in New York. The Dow Jones Industrial Average declined 113.63 points, or 0.9 percent, to 12,543.57.
“It’s a combination of a worsening of the debt crisis in Europe, and deficit and debt uncertainty in the U.S.,” said Eric Teal, chief investment officer at First Citizens Bancshares Inc. in Raleigh, North Carolina, which manages $4 billion. “The markets will remain under pressure until the debt crisis in Europe is perceived to be better contained.”
The S&P 500 advanced 0.3 percent to 1,343.80 last week, extending its climb since June 24 to 5.9 percent through July 8. That’s the biggest two-week increase since October 2009. Equities have rebounded in July after the S&P 500 tumbled 3.2 percent in May and June.
Euro-area countries may have to double their bailout fund to 1.5 trillion euros ($2.1 trillion) to cover a crisis in Italy, the European Central Bank said, according to German newspaper Die Welt, citing unidentified “high-ranking” people at central banks. The Financial Times cited unidentified senior officials as saying European leaders are prepared to accept that Greece should default on some of its bonds.
Debt Talks
President Barack Obama and congressional leaders are making little progress in debt-reduction talks after House Speaker John Boehner said all sides must settle for a smaller plan than the president seeks. Obama plans to hold a press conference at 11 a.m. in Washington today, his fifth round of public remarks on the debt in a week, as he presses lawmakers to reach an agreement to raise the $14.3 trillion U.S. borrowing ceiling before an Aug. 2 deadline.
Bank of America retreated 2.2 percent to $10.47 and JPMorgan fell 1.9 percent to $39.98. Morgan Stanley (MS) lost 1.1 percent to $22.06 and Citigroup Inc. (C) slipped 2.1 percent to $41.15. Goldman Sachs Group Inc. (GS) slid 1 percent to $132.72.
Alcoa Earnings
Alcoa will start the second-quarter earnings season today when it becomes the first Dow-average company to release results after the close of trading. Corporate profits are forecast to have grown by 13 percent in the period, according to analyst estimates compiled by Bloomberg, the smallest increase in two years.
The largest U.S. aluminum producer fell 2.2 percent to $16.02 as metal prices dropped on the London Metal Exchange and Australia announced a new carbon tax. Twelve companies on the benchmark S&P 500, including JPMorgan, Citigroup and Google Inc., will publish their earnings this week.
GM retreated 2.1 percent to $30.91 as European carmakers declined after Renault forecast that its sales this year will drop as much as 2 percent in Europe.
Arch Chemicals Inc. (ARJ) soared 11 percent to $46.88 after Lonza Group AG, the world’s biggest maker of drug ingredients, agreed to pay $47.20 per share for the maker of products that kill micro-organisms. Lonza said it will pay $1.2 billion in cash. Including debt, the acquisition values Arch at $1.4 billion.
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