US stocks fell on Friday, ending their worst month in more than a year as measures of consumer spending and Chicago-area business activity disappointed. Walt Disney, Bank of America and Cisco Systems were among the decliners.
The Dow Jones Industrial Average dropped 122.36 points (1.19%) to 10,136.63. The measure fell 0.56% this week and dropped 7.92% this month, marking the measure's biggest monthly drop since February 2009. The Dow's point drop of 871.98 points this month represented the largest May point drop in the measure's history, while the Dow had its worst May percentage performance since 1940. The Dow is now down 2.79% for the year to date.
On Friday, the Dow's decliners were led by Walt Disney, which fell 95 cents (2.8%) to $33.42. Bank of America was also weak with a decline of 44 cents (2.7%) to $15.74. Cisco slid 51 cents (2.2%) to $23.16. Cisco was also one of the Dow's worst performers this month with a tumble of 14% for May. Only Microsoft had a bigger percentage monthly decline among the Dow's 30 components; Microsoft plunged 16% in May. Microsoft slipped 20 cents (0.8%) to $25.80.
The Nasdaq Composite fell 20.64 (0.91%) to 2,257.04. The measure ended the week up 1.26% but it tumbled 8.29% this month, representing the measure's biggest monthly drop since the fall of 2008 and its worst May in 10 years. The measure is now down 0.53% for the year.
The Standard & Poor's 500 index declined 13.65 (1.24%) to 1,089.41. For the week, it eked out a gain of 0.16%. However, the measure dropped 8.20% this month, its worst monthly percentage drop since February 2009 and worst May percentage performance since 1962. The S&P 500's monthly point drop of 97.28 represented its worst monthly point decline since October 2008 and the worst May point drop in its history. It is now down 2.30% for the year to date.
The energy and financial sectors led the S&P 500's decline. Energy stocks mirrored a drop in crude-oil futures. The decline in financials followed an endorsement from the House of Representatives of higher taxes for investment-fund managers and US multinational firms as part of a larger bill that would extend jobless benefits and temporary tax breaks.
Hurting the broader market, data released on Friday morning showed consumer spending, a key growth engine for the economy, was flat last month despite low prices. Economists were expecting spending to rise by 0.1%.
Investors were also disappointed by data showing US business activity in the Chicago area expanded at a slower-than-expected pace in May, while employment contracted during the month.
Further spooking the market, Fitch Ratings lowered its rating on Spain's debt to AA+ from AAA. The downgrade came despite this week's passage of austerity measures by the Spanish government - a move that bulls had hoped would help the country avoid struggles similar to those of Greece.
J. Crew climbed $1.78 (4.1%) to $45.64. The retailer's fiscal first-quarter earnings more than doubled on fewer markdowns. J. Crew also raised its earnings guidance for the full year.
Guess slipped 18 cents (0.5%) to $37.99. The retailer's fiscal first-quarter earnings rose 55% as the company benefited from strength in Asia, where sales increased 50%. But Guess also reduced its earnings forecast for the full year and predicted second-quarter earnings below analysts' expectations.
US-based Amgen and UK partner GlaxoSmithKline said experimental bone drug Prolia was granted marketing approval in Europe for treating the brittle bone disease osteoporosis, the first approval for the potential blockbuster product worldwide. Amgen rose 35 cents (0.7%) to $51.78, while American depositary shares of GlaxoSmithKline advanced 10 cents (0.3%) to $33.46.
Harsco fell 60 cents (2.2%) to $27.21. Standard & Poor's Ratings Services cut its ratings outlook on the company to negative from stable, citing expectations the industrial-services company's credit quality will remain constrained thanks to weak commercial construction markets.
For Australian ADRs listed on the NYSE, BHP Billiton weakened $2.09 (3.12%) to US$64.84, Rio Tinto Plc fell $1.21 (2.56%) to US$46.10, ResMed weakened 84 cents (1.32%) to US$62.89, Telstra Corporation dropped 11 cents (0.88%) to US$12.36, Telecom Corporation of NZ shed 19 cents (2.89%) to US$6.38 and Westpac improved 40 cents (0.41%) to US$98.23.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.29% and the five year yield was 2.09%.
European shares turned around to close lower on Friday as discouraging US consumer spending raised concerns that the pace of the economic recovery may be slowing while shares of BP and Prudential weighed.
The Stoxx Europe 600 index gave up earlier gains to end down 0.3% to 244.09.
The decline came after two days of strong gains for the index, which rose 3% on Thursday and 2.4% on Wednesday. It pared weekly gains to 2.9%. Over the course of the month the index has lost 6.1%.
Exporters were among the strongest performers by sector, with Daimler shares up 0.8% in the auto sector.
On the regional level, the German DAX index rose 0.2% to 5,946.18, the UK FTSE 100 index slipped 0.1% to 5,188.43 and the French CAC-40 index declined 0.3% to 3,515.06.
Several oil producers were weak, however. Shares of BP declined 5% after it said it may take a further 24 to 48 hours to complete the "top kill" procedure on the oil leak in the Gulf of Mexico. If the well is successfully killed then cementing operations would follow, the group added. BP said the cost of the response to date is around $930m.
Total shares fell 0.5%, but Royal Dutch Shell gained 0.4% after it said that it will buy units which own most of the US tight gas business of East Resources Inc for $4.7bn in cash.
Staying with deal news, shares of life insurer Prudential lost 1.1%, partially reversing strong gains made in the previous session amid reports of shareholder opposition to its $35.5bn deal to buy AIG's AIA unit. Prudential said that it has held further discussions with American International Group over its agreement to buy AIG's Asian operations. The talks are continuing and may, or may not, lead to a change in the terms of the deal, Prudential said.
On the FTSE 100, Rio Tinto climbed 50 pence (0.02%) to 3,238.00 pence and BHP Billiton lost 25.50 pence (1.32%) to 1,924.71 pence.
Asian markets ended higher as investor optimism spurred by Wall Street's strong performance on Thursday helped lift financial stocks and exporters.
Japan's Nikkei Stock Average climbed 1.3%, Hong Kong's Hang Seng Index jumped 1.7% and China's Shanghai Composite closed flat.
New Zealand shares ended higher but trading remained tepid with most investors sticking firmly to the sidelines while some key blue chips lost ground. The benchmark NZX-50 Index ended up 0.4%, or 12.91 points, at 3,047.75.
Base metals on the London Metal Exchange slipped after holding steady for much of the day, weighed by a drop in equities. Aluminium fell $30 (1.46%) to $2,025 while copper weakened $110 (1.58%) to $6,860 and nickel dropped $610 (2.82%) to $21,050. Zinc shed $10 (0.52%) to $1,925 and lead lost $10 (0.54%) to $1,825. Comex copper was last quoted at 310.45 US cents per pound.
Gold futures recovered for a minute gain after some of the recent worries about Europe returned when ratings agency Fitch downgraded the debt of Spain. Spot gold was last quoted at $1,212.75. Comex gold futures firmed $0.60 (0.05%) to $1,215.00. Spot silver was last quoted at $18.33.
Crude oil dropped below $74 a barrel as the US dollar strengthened following a downgrade of Spain's sovereign debt by a credit rating agency. West Texas Intermediate was last quoted at US$73.97 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8148 euros, 91.02 yen, 1.184 AUD and 69.30 pence.