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Stocks drop after weak Spanish bond sale


This news story was published on April 4, 2012.
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By Kate Gibson, MarketWatch –

NEW YORK — U.S. stocks on Wednesday took their biggest hit in nearly a month on concern about Spain, where a weak bond sale revived investor concern about global growth.

The Spanish debt sale “seemed to bring the focus back on Europe a little bit. It is reminding people that Europe isn’t fixed or solved,” said Brian Lazorishak at Chase Investment Counsel.

The market had also been on the prowl for a catalyst to take back at least some of the gains that had S&P 500 up 12 percent in the first quarter.

“We were due for a pause, or a moderate pullback, so you might see some of that in the near term, given how strong the first quarter was,” said Glenn Guard, director of investment management at Campbell Wealth Management in Alexandria, Va.

“The Spanish auction was a disappointment, but given the move we saw in the first quarter, the market at the very least was in need of some kind of consolidation,” said Lazorishak.

The Dow Jones industrial average fell 124.8 points, or 1 percent, to 13,074.7.

The S&P 500 index declined 14.42 points, or 1 percent, to 1,398.96. The session marked the worst for both indexes since March 6.

Capping its worst session of 2012, the Nasdaq composite retreated 45.48 points, or 1.5 percent, to 3,068.09.

“There’s growing concern about growth; the Spanish bond auction is particularly of concern for investors,” said Dan Greenhaus, chief global strategist at BTIG LLC in New York.

“We’ve had a terrific rally in risk assets, so if this is going to be the catalyst, so be it,” said Greenhaus of Wall Street’s fall that began Tuesday when minutes from the Federal Reserve’s last policy meeting signaled less interest in further quantitative easing moves.

“Economists knew the Fed was likely to tamp down debate on QE, but at the same time people were caught off guard by how few were interested in doing any additional easing,” Greenhaus said.

Oil prices fell to a seven-week low after U.S. inventories climbed, with crude for May delivery off $2.54 at $101.47 a barrel. Gold declined to a 12-week low, with the futures contract for June delivery falling $57.90, or 3.5 percent, to end at $1,614.10 an ounce.

Spain sold 2.59 billion euros ($3.4 billion) of bonds due between January 2015 and October 2020, versus an intended maximum of 3.5 billion euros ($4.6 billion).

American companies grew payrolls in March, illustrating ongoing strengthening in the labor market two days ahead of the Labor Department’s monthly jobs report. Figures from ADP had payrolls up by 209,000 in March after a revised 230,000 gain in February.

“The ADP report was essentially in line today. Bottom line, the ADP numbers were good. Labor’s share of income — meaning corporate profits — is the lowest in history, which is bad for employees today but good in terms of there is certainly enough cash on corporate balance sheets to continue hiring, so the trend is a good one,” said Guard at Campbell Wealth Management.

Stock losses intensified after the Institute for Supply Management’s services-sector index for March declined to 56 percent from 57.3 percent in February.

“Was it weaker than expected? Sure. But let’s be clear: 56 is a very high number, and it is not indicative of anything we need to be worried about,” said Greenhaus at BTIG.

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