U.S. stocks tumbled in the worst Thanksgiving week loss for the Standard & Poor’s 500 Index since 1932 as concern grew that Europe’s debt crisis will spread and as American policymakers failed to reach agreement on reducing the federal budget.
Shares of Bank of America Corp., Hewlett-Packard Co. and Caterpillar Inc. dropped at least 7.6 percent to lead declines in the Dow Jones Industrial Average.
Energy stocks fell the most in the S&P 500 as oil declined for a second week and as Chevron Corp. lost 5.7 percent after it was blocked from drilling in Brazil while the government investigates a recent spill. Netflix Inc. slid 18 percent after raising $400 million to bolster cash.
The S&P 500 slid 4.7 percent to 1,158, closing at the lowest level since Oct. 7. The Dow fell 564 points, or 4.8 percent, to 11,231 this week.
“We’ve resumed focus on the European debt issues,” Terry Morris, senior equity manager at National Penn Investors Trust Co., based in Wyomissing, Pa., said in a telephone interview. His firm manages about $2.2 billion.
The situation in Europe doesn’t seem to be improving, which makes the market defensive, he said. Spending cuts taking hold in the U.S. will be a negative, too, because they will be a drag on economic growth.
The S&P 500 has fallen for seven days, the longest streak in four months, and has tumbled 7.6 percent so far this month. U.S. equities erased an early advance in the final session of the week as S&P lowered Belgium’s credit rating and Reuters reported that Greece was demanding that private investors accept larger losses on their debt.
The cost of insuring European sovereign bonds against default rose to a record this week as Germany failed to find buyers for 35 percent of the bonds offered at an auction.
German Finance Minister Wolfgang Schaeuble said market turbulence sparked by the euro region’s sovereign-debt crisis would last for a few months.
Congress’ special debt reduction committee failed to reach an agreement this week, setting the stage for $1.2 trillion in automatic spending cuts and fueling concern that economic stimulus measures that are set to expire will not be renewed.
Still, S&P reaffirmed it would keep the United States’ credit rating at AA+ after stripping the government of its top AAA grade on Aug. 5.
Stocks fell Tuesday as revised Commerce Department figures showed that gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate. U.S. stock exchanges were shut Thursday for Thanksgiving and closed three hours early on Friday payday loan online.
“The market’s not trying to distinguish between stocks right now; it’s focused almost exclusively on macro factors,” John Linehan, director of U.S. equities and a portfolio manager at T. Rowe Price Associates Inc., said at a press briefing Tuesday in New York. “There’s a tremendous amount of volatility in the marketplace. The market’s on the gas pedal and the tires are spinning, but we’re really actually not going anywhere.”
Companies most closely tied to the economy fell, sending the Morgan Stanley Cyclical Index down 6.2 percent, the most since the week ending Sept. 23. Caterpillar, the world’s largest construction and mining equipment maker, dropped 7.7 percent to $86.72.
All 10 groups in the S&P 500 fell this week, led by a 6.2 percent slump in energy producers and a 5.8 percent drop in financial shares.
Bank of America declined 11 percent, the most in the Dow, to $5.17, while Citigroup Inc. decreased 10 percent to $23.63. Both are among lenders that may have to temper plans to raise dividends and buy back stock next year as the Federal Reserve toughens capital tests for the biggest U.S. banks.
Netflix sank 18 percent, the most in the S&P 500, to $63.86. Technology Crossover Ventures will buy $200 million in zero-coupon senior convertible notes due in 2018 in the video-streaming and DVD subscription service, and T. Rowe Price Associates Inc. funds will buy $200 million in stock. The transactions suggest Netflix’s cash squeeze may last longer than it had anticipated, said Michael Pachter, an analyst with Wedbush Securities. The company needs to spend more to make its streaming content stand out against a growing list of competitors, he said.
Commodity producers declined as reports showed that manufacturing contracted in Europe and may shrink by the most in more than two years in China. AK Steel Holding Corp., the third-largest U.S. steelmaker by volume, plunged 16 percent to $7.04. Alpha Natural Resources Inc., the coal producer that bought Massey Energy Co. for $7.1 billion in June, lost 15 percent to $18.81.
Chevron in Brazil
Chevron lost 5.7 percent to $92.29. The U.S. oil producer operating the $3.6 billion Frade oilfield off Brazil was blocked from drilling in the South American country while the government investigates a recent spill.
Hewlett-Packard slipped 9.3 percent to $25.39 after profit forecasts that missed analysts’ estimates. Meg Whitman, who took over as chief executive officer two months ago, used her first earnings conference call to tell investors they needed to lower expectations. The first-quarter profit forecast and full-year earnings outlook missed estimates