U.S., Europe Stocks Fall, Commodities Drop on Recession Concern

U.S. and European stocks tumbled, sending the Standard & Poor’s 500 Index down the most in two months, as the World Bank said the recession will be deeper than previously forecast. Treasuries rose, while oil fell below $67 a barrel and metals slumped.
Freeport-McMoRan Copper & Gold Inc. and Alcoa Inc. sank at least 8.9 percent, while BP Plc and Occidental Petroleum Corp. lost more than 3.8 percent amid the biggest retreat in the Reuters/Jefferies CRB Index of 19 raw materials in almost three weeks. Bank of America Corp. dropped 9.7 percent as two board members resigned. Both the S&P 500 and Dow Jones Industrial Average erased their gains for the year.
“The worries are still out there,” said John Wilson, who helps oversee $120 billion as chief market technician at Morgan Keegan & Co. in Memphis, Tennessee. “Nobody is ready to get the trumpets out and herald the end of the recession.”
The S&P 500 slid 3.1 percent to 893.04 at 4:05 p.m. in New York following last week’s 2.6 percent slump. The Dow average sank 200.72 points, or 2.4 percent, to 8,339.01. Europe’s Dow Jones Stoxx 600 fell 2.8 percent and the MSCI World Index decreased 2.7 percent. Almost 14 stocks fell for each rising on the New York Stock Exchange, the broadest sell-off since May 13.
Stocks and commodities slid as the World Bank said unemployment and poverty will rise in developing nations and predicted a 2.9 percent contraction in the global economy this year. That compares with a prior estimate of a 1.7 percent decline. Growth is expected to return in 2010 at 2 percent, less than the 2.3 percent forecast about three months ago.
Rebound Pared
While the S&P 500 is still up 32 percent from a 12-year low on March 9, the index has fallen 5.6 percent since June 12. Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago. Insiders of S&P 500 companies were net sellers for 14 straight weeks as the market rallied, according to data compiled by InsiderScmaore.com.
The S&P 500 today slid below 900.77, its average level over the past 200 days, in a bearish signal to analysts who study charts to predict market movements.
Nouriel Roubini, the New York University economics professor who predicted the financial crisis, said the global economy may suffer another slump due to higher oil prices and widening budget deficits.
“I see the worry of a double whammy” from energy costs and fiscal burdens, increasing the risk of a setback in the economic recovery, Roubini told a conference in Paris today. Oil may rise to $100 a barrel, he said.
Commodities Slump
Freeport-McMoRan, the world’s largest publicly traded copper producer, plunged 11 percent to $45.18 for the biggest decline since March 2. U.S. Steel sank 9.2 percent to $34.12. Alcoa decreased 8.9 percent to $10.02. The strengthening dollar dulled the appeal of commodities as an alternative investment, helping send copper, gasoline and oil prices lower.
Exxon Mobil Corp. retreated the most in three months, losing 3.1 percent to $68.84. BP, Europe’s second-largest oil company, lost 3.8 percent to 478 pence in London. Crude oil fell for a second straight day in New York, sliding 3.8 percent to $66.93, on concern that fuel demand will remain depressed.
Commodity shares declined even as Anglo American Plc rallied 4.6 percent in London after Xstrata Plc proposed a “merger of equals” with the mining company.
Banks Slide
Bank of America tumbled 9.7 percent to $11.94, the steepest decline in more than a month. The lender that took $45 billion in U.S. aid said board members Tommy Franks and Joseph Prueher resigned, pushing the total of departing directors to seven since April.
Wells Fargo & Co. and JPMorgan Chase & Co. lost more than 6 percent, dragging a measure of financial stocks down 6.2 percent for the biggest slump among the 10 industry groups.
Mortgage originations in the U.S. may total $2.03 trillion this year, 27 percent less than earlier forecast, as rising interest rates reduce home refinancings, the Mortgage Bankers Association said.
Walgreen Co. lost 5.7 percent to $29.64. The company reported profit of 53 cents a share, missing the average analyst estimate by 6 percent, according to Bloomberg data.
CarMax Inc. declined 8.3 percent to $14.04. The biggest U.S. used-car dealer was cut to “hold” from “buy” at Deutsche Bank AG, which said the risk-reward ratio for the company’s stock is more balanced after its recent rally.
‘Remain Weak’
Federal Reserve officials on June 24, at the conclusion of their two-day meeting, may say the U.S. is showing signs of emerging from the worst recession in a half century. Following their last meeting in April, policy makers said the economy will “remain weak for a time.” The central bankers will also keep the benchmark interest rate in the range of zero to 0.25 percent, economists said.
Apple Inc. slipped 1.5 percent to $137.37. Apple Chief Executive Officer Steve Jobs had a liver transplant about two months ago, a person familiar with the matter said. Jobs, a cancer survivor, went on medical leave in January after saying he wanted to take himself out of the limelight and focus on his health. Apple should disclose whether he had a liver transplant if he returns to work this month in the role of CEO, corporate governance experts said.
Apple slipped even after saying it sold more than 1 million iPhone 3G S units in the device’s opening weekend. Piper Jaffray & Co. predicted sales of about 750,000 after initially forecasting 500,000 in the debut weekend. Apple also said 6 million people have downloaded its new iPhone 3.0 software in the five days it’s been out.
Bonds Gain
Treasuries advanced for a second day as the World Bank forecast made it more likely the Fed will keep interest rates near zero for longer. Traders reduced bets the central bank will raise borrowing costs by the end of the year, according to futures on the Chicago Board of Trade.
Today’s slide extended losses from the S&P 500’s 2.6 percent drop last week, its first weekly decline in more than a month. Last week’s retreat came as lower crude oil hurt fuel producers and S&P downgraded the credit ratings of 18 banks.
The benchmark index for U.S. stock options jumped the most since April 20 today. The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 11 percent to 31.17. The index, which measures the cost of using options as insurance against declines in the S&P 500, is down from a record 80.86 in November yet above its 20 average over its 19-year history.
The S&P 500 has risen or fallen by more than 3 percent on 23 trading days this year, the third-most in the benchmark’s 81- year history after 1932 and 1933, according to Howard Silverblatt, the senior index analyst at S&P in New York.