June 30 (Bloomberg) -- U.S. stocks fell, limiting the biggest quarterly advance for the Standard & Poor’s 500 Index since 2003, after consumer confidence unexpectedly slid and delinquencies on the least-risky mortgages more than doubled.
Caterpillar Inc., Expedia Inc. and Starbucks Corp. lost more than 4.4 percent after the Conference Board’s sentiment index slumped to 49.3, six points below the average economist forecast. Citigroup Inc. and JPMorgan Chase & Co. dropped as government data showed prime mortgages 60 days or more past due climbed to 2.9 percent in the first quarter from 1.1 percent at the same time last year.
The S&P 500 lost 1.4 percent to 914.16 at 1:58 p.m. in New York, putting the index on track for the first monthly drop since February. The Dow Jones Industrial Average slid 121.98 points, or 1.4 percent, to 8,407.4. Stocks in Europe retreated, while Asian shares rallied.
“You had a great market run-up this quarter and people are starting to wonder what’s going to happen next,” said Jonathan Vyorst, senior vice president at New York-based Paradigm Capital Management Inc., which oversees about $1.5 billion. “The fundamentals of the economy aren’t really that strong.”
Even though the S&P 500 has gained almost 15 percent this quarter, the rally stalled in June amid concern share prices already reflect a economic recovery, leaving the index down 0.6 percent for the month. Investors are paying 14.5 times trailing 12-month profit for companies in the S&P 500, near the most- expensive level in seven months.
‘Wall of Worry’
The Chicago Board Options Exchange Volatility Index, or VIX, rose for the first time in six days, adding 6.9 percent to 27.09. The VIX yesterday dropped below its level when Lehman Brothers Holdings Inc. collapsed in September, yet was still 26 percent above its average.
Above-average volatility shows traders are still paying up for insurance to protect against losses in the S&P 500. Bigger equity gains depend on investors overcoming the remaining skepticism, sometimes called the “wall of worry,” spurred by last year’s 38 percent slump in the equity index, the steepest slide since 1937.
Caterpillar, the biggest maker of earth-moving equipment, dropped 4.8 percent to $33.06. Expedia, the Internet travel agency, tumbled 6.4 percent to $14.90. Starbucks slumped 4.4 percent to $13.99. Consumer confidence weakened as U.S. firms were slow to start hiring again and the wealth destruction caused by the housing slump forced Americans to rebuild savings.
Banks Slump
Citigroup fell 1.7 percent to $2.97. JPMorgan lost 1.9 percent to $33.93. Overall, mortgages 60 days or more past due rose 88 percent from last year, according to data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.
Southern Co. sank 3 percent, the most in two months, to $30.90. The largest U.S. power producer was cut to “hold” from “buy” by Citigroup Inc. analysts.
“We’ve had a rally that lifted most boats, but I think the advance from here is going to be more selective,” said Alan Gayle, the Richmond, Virginia-based director of asset allocation at Ridgeworth Investments, which manages $60 billion. “As we get closer to the earnings season, investors are going to be looking carefully for companies with signs of sustainable growth.”
AIG Tumbles
American International Group Inc. posted the S&P 500’s steepest loss, plunging 13 percent to $1.16. The insurer bailed out by the U.S. said valuation declines on credit-default swaps sold to European banks could have a “material adverse effect” on the company’s results. The risk of losses on the derivatives may last “longer than anticipated,” AIG said yesterday in a regulatory filing.
Energy stocks lost 1.3 percent as a group as oil dropped below $70 a barrel on evidence the recession may be worsening around the world. Schlumberger Ltd., Tesoro Corp. and Hess Corp. retreated more than 2.2 percent.
The U.K. economy shrank the most since 1958, contracting 2.4 percent from the final three months of 2008, the Office for National Statistics said. Gross domestic product in Canada contracted for a ninth month, declining 0.1 percent in April, because of falling output in the retail, manufacturing and energy industries, according to data from Statistics Canada.
Benchmark indexes rose at the open following better-than- estimated results at Apollo Group Inc. and H&R Block Inc. and reports showing home prices fell less than forecast and two purchasing managers’ gauges topped economists’ estimates.
“My guess would be that home prices are going to level off -- they’re not going to keep falling,” Robert Shiller, an economist at Yale University and co-founder of the home price index that bears his name, told Bloomberg Television. Still, it’s “hard to predict” a speculative market, and “I am not optimistic that we’re going to see any sharp rebound.”
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