September 26th, 2012

S&P 500 Futures – U.S. stocks fell for a fifth day, sending the Standard & Poor’s 500 Index to its longest retreat since July, as concern grew Europe’s debt crisis is worsening.

PulteGroup Inc. (PHM) dropped 4.7 percent, helping to give homebuilders their biggest decline since June, after new homes sales missed estimates. Energy and technology companies dropped the most among the benchmark gauge’s 10 industry groups as oil fell to a seven-week low and Jabil Circuit Inc. (JBL) tumbled 9.9 percent amid a disappointing forecast.

The S&P 500 slid 0.6 percent to 1,433.32 in New York. The benchmark index is down 1.9 percent over five days. The Dow Jones Industrial Average lost 44.04 points, or 0.3 percent, to 13,413.51 today. Almost 6.4 billion shares traded hands on U.S. exchanges, 6.3 percent higher than the three-month average.

“We’re at a point where stimulus continues to be added and yet we’re seeing no meaningful improvements in the global economy,” Sean Lynch, the Omaha, Nebraska-based global investment strategist for Wells Fargo Private Bank, which oversees $169 billion, said in a telephone interview. “When you figure in some of the political risks along with Spain and Greece leading headlines once again, it makes equity investors want to pause right now.”

Stocks worldwide fell as Germany, the Netherlands and Finland said late yesterday that Spain should bear the cost of problems in their banks, with the European Stability Mechanism assuming only a limited burden in recapitalizations. The Bank of Spain said the economy kept falling at a “significant pace” in the third quarter.

S&P 500: Highest Levels

U.S. equity indexes fell yesterday from their highest levels in almost five years as Federal Reserve Bank of Philadelphia President Charles Plosser said new bond buying announced by the Fed this month probably won’t boost growth or hiring. The S&P 500 has erased all its gains since the Federal Open Market Committee said Sept. 13 that it will undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.”

Optimism that central banks around the world will take steps to boost economic growth has sent the S&P 500 up 14 percent this year. The European Central Bank this month approved unlimited bond-buying programs while the Bank of Japan unexpectedly increased its asset-purchase target.

S&P 500: Investor Complacency

“The Fed cheerleading and stimulus has lulled investors into a sense of complacency that the Fed can keep the economy afloat and growing,” Eric Thorne, who helps oversee about $6 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania, said in a phone interview. “We’re afraid when reality sets in that this economic recovery may take longer than expected, the market could pull back quickly and meaningfully.”

The S&P 500 has rallied 5.2 percent so far in the third quarter and pension funds may need to sell stocks this week to rebalance their asset allocations, according to UBS AG strategist Boris Rjavinski. U.S. pensions, which UBS estimates hold about 55 percent of their $5 trillion in stocks, may pull as much as $36 billion from equities and put as much as $19 billion into fixed income, Rjavinski wrote in a note to clients dated Sept. 24. The largest outflows will be from stocks of large U.S. companies, with as much as $21 billion being sold, the strategist said.

VIX Jumps

The decline in stocks prompted investors to seek protection against losses, driving up the cost of options for a third day. The Chicago Board Options Exchange Volatility Index (VIX), known as the VIX, climbed 8.9 percent to 16.81.

The S&P Supercomposite Homebuilding Index (S15HOME) tumbled 4.2 percent, the most since June, as all of its 11 members fell. Purchases of new U.S. homes declined 0.3 percent to a 373,000 annual pace following a revised 374,000 rate in July that was higher than previously estimated, figures from the Commerce Department showed. The median estimate of 71 economists surveyed by Bloomberg called for a rise to 380,000.

PulteGroup dropped 4.7 percent to $15.30, while D.R. Horton Inc. slid 3.9 percent to $20.90. Lennar Corp. (LEN) decreased 4.5 percent to $34.64.

Energy shares in the S&P 500 slipped 0.9 percent. Crude futures erased 1.5 percent as the U.S. government reported lower oil demand. Noble Corp. (NE) retreated 2.9 percent to $35.17 while Denbury Resources Inc. (DNR) fell 2.9 percent to $16.04.

Technology Shares

Technology shares in the S&P 500 dropped 0.8 percent. Apple Inc. (AAPL) fell for a third day, losing 1.2 percent to $665.18, after earlier this week reporting debut weekend sales for the iPhone 5 that fell short of some analysts’ estimates because of supply constraints. The shares are down 5 percent so far this week, for the biggest three-day decline since May.

Jabil Circuit slid 9.9 percent, the most in the S&P 500, to $18.90. The electronics supplier forecast first-quarter earnings will be no more than 62 cents a share, missing the average analyst estimate of 67 cents, as demand across most of its business segments weakened.

NetApp Inc. (NTAP), which Jabil counts among its biggest customers, declined 4.2 percent to $32.98.

SanDisk Corp. (SNDK) fell 2.8 percent to $42.66. Alex Gauna, an analyst with JMP Securities LLC, downgraded the biggest maker of flash-memory cards to market perform from market outperform, citing weakness in electronics demand and supply constraints.

Blyth Inc. (BTH) tumbled 21 percent to $25.68. ViSalus, a health- products business bought by the maker of candles and decorations in 2008, withdrew its filing for an initial public offering, citing “uncertain market conditions.”

Dean Foods Co. (DF) climbed 5.5 percent, the most in the S&P 500, to $16.23. The largest U.S. dairy processor said it’s considering a sale of its Morningstar unit that sells milk products to retailers and restaurants.

American Greetings Corp. (AM) rallied 17 percent to $16.82. The biggest publicly traded greeting-card company said Chief Executive Officer Zev Weiss and Chief Operating Officer Jeffrey Weiss offered to take the company private for $17.18 a share.

- Lu Wang and Inyoung Hwang in New York at Bloomberg.