Jan. 24 (Bloomberg) — U.S. stocks fell Friday, pushing the Dow Jones Industrial Average toward the biggest weekly decline since May 2012, as a selloff in developing-nation currencies spurred concern global markets will become more volatile.
Caterpillar Inc., General Electric Co. and Boeing Co. slid at least 2.7 percent to lead losses in the Dow. Kansas City Southern plunged 15 percent, the biggest retreat since 2008, after reporting lower-than-estimated earnings. International Game Technology tumbled 14 percent as the maker of slot machines posted first-quarter profit that missed analysts' projections.
The Standard & Poor's 500 Index retreated 1.8 percent to 1,795.25 at 3:30 p.m. in New York for its biggest drop since June. The benchmark index has declined 2.4 percent this week to the lowest since Dec. 13. The Dow slid 262.07 points, or 1.6 percent, to 15,935.28 today. The 30-stock gauge is down 3.2 percent this week. Trading in S&P 500 stocks was 53 percent above the 30-day average at this time of day.
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"The volatility of the emerging markets and the currency impacts are affecting U.S. markets," Eric Teal, who helps oversee $3.5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone. "Following the strong gains of last year, I think it's to be expected that you might have an overreaction here of selling."
Emerging markets
Emerging-market currencies had their worst selloff in five years yesterday as Argentine policy makers devalued the peso by reducing support in the foreign-exchange market. The Turkish lira plunged, Ukraine's hryvnia sank to a four-year low and South Africa's rand weakened beyond 11 per dollar for the first time since 2008. China's banking regulator ordered its regional offices to increase scrutiny of credit risks in the coal-mining industry, said two people with knowledge of the matter, signaling government concern about possible defaults.
Investors are losing confidence in some of the biggest developing nations, extending the rout in currencies that began last year when the Federal Reserve signaled it would slow the pace of its monthly purchases of Treasuries and mortgage bonds. The S&P 500 fell 0.9 percent yesterday and the Dow dropped to a one-month low after a gauge of manufacturing activity in China unexpectedly contracted.
The MSCI Emerging Markets Index lost 1.3 percent, extending its decline for the year, while Europe's equity benchmark slid the most since June.
Three rounds of Fed monetary stimulus have helped the S&P 500 rise 167 percent from a 12-year low in 2009. The U.S. equity benchmark rallied 30 percent to a record last year, the most since 1997. Equities have since pared gains, with the index down almost 3 percent for 2014.
"You've had a massive selloff in these emerging-market currencies," Nick Xanders, a London-based equity strategist at BTIG Ltd., said by telephone. "Ruble, rupee, real, rand: they've all fallen and the main cause has been tapering. A lot of companies that have benefited from emerging-markets growth are now seeing it go the other way."
The S&P 500 trades at 15.4 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
Ten companies in the S&P 500, including Procter & Gamble Co. and Bristol-Myers Squibb Co., reported results today. Of the 121 index members that have released earnings so far this season, 73 percent have beaten estimates for profit and 67 percent have exceeded sales projections, according to data compiled by Bloomberg.
Earnings forecast
Per-share profit for companies in the benchmark probably climbed 6.6 percent in the fourth quarter, while sales increased 2.6 percent, according to analysts surveyed by Bloomberg.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, surged the most since April, adding 30 percent to 17.87 today. The gauge has rallied 44 percent this week, poised for the biggest weekly increase since May 2011.
All 10 main S&P 500 groups retreated today. Industrial and materials stocks lost more than 2.3 percent to pace declines. Boeing sank 2.8 percent to $137.30 and Caterpillar lost 2.7 percent to $86.06, among the biggest declines in the Dow.
Companies whose earnings are most tied to economic swings dropped. The Morgan Stanley Cyclical Index lost 3 percent, the most since April, as Whirlpool Corp. slid 5.1 percent to $145.57. An S&P gauge of homebuilders fell 3.7 percent for the steepest decline since August. D.R. Horton Inc. slipped 5.2 percent to $20.82 and PulteGroup Inc. fell 4.4 percent to $18.79.
The Dow Jones Transportation Average, which reached a record yesterday, slid 4 percent for the biggest one-day decline since 2009. Delta Air Lines Inc. fell 4.5 percent to $31.18.
Kansas City Southern lost 15 percent to $99.57. The railroad operator reported fourth-quarter profit that missed analysts' estimates as energy revenue fell 17 percent due to a decline in coal shipments.
International Game Technology tumbled 14 percent to $15.23. The Las Vegas-based company posted earnings of 25 cents a share, missing the average analyst estimate by 6 cents.
Intuitive Surgical Inc. lost 5.7 percent to $414.10. The maker of a robotic-surgery device said fourth-quarter systems revenue decreased by 23 percent from a year earlier.
Phone, utility and consumer-staples stocks, which have the highest dividend yields among 10 S&P 500 groups, fell less than 0.8 percent, as yields on 10-year Treasuries fell to an eight- week low, boosting the allure of equity income.
Dividend stocks
Procter & Gamble climbed 2.3 percent to $80.07. The world's largest consumer-goods maker posted second-quarter profit that topped analysts' estimates as sales of products such as Pampers diapers rose in emerging markets.
Microsoft Corp. added 2.7 percent, the most in the Dow, to $37.01. Customers flocked to the company's game consoles and cloud software last quarter, helping sales beat analysts' projections.
Juniper Networks Inc. rallied 7 percent to $27.83 for the biggest gain in the S&P 500. The networking-equipment maker reported sales that exceeded analysts' estimates. Revenue in the fourth quarter increased 12 percent to $1.27 billion from $1.14 billion a year earlier, the Sunnyvale, California-based company said yesterday in a statement. Analysts had predicted sales of $1.22 billion.
Discover Financial Services climbed 3.5 percent to $54.24. Discover rose the most in three months after reporting profit that beat analysts' estimates as credit-card spending and loan demand increased.
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