Wall Street falls 1 percent on euro uncertainty

May 8th, 20124:49 pm @

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NEW YORK |
Tue May 8, 2012 12:29pm EDT

NEW YORK (Reuters) – Wall Street tumbled to its lowest level in two months on Tuesday as new questions emerged over Europe’s ability to fend off a deeper crisis in the debt-stricken region.

The SP 500 crashed through its lows for April, a level traders had seen as support, and hit bottoms from early March. The move was part of broad run to perceived safer assets. MKTS/GLOB

Elections in France and Greece appeared to herald a new era of opposition to government austerity, sparking new uncertainty and came amid concern about economic growth in the United States and China.

“It will probably mean that it’s prudent to have a little bit less risk exposure here,” said David Joy, chief market strategist at Ameriprise Financial in Boston. “You’re probably going to see a rotation into more defensive types of stocks.”

Sectors sensitive to the economy floundered, with the SP consumer discretionary sector .GSPD falling 2 percent. Investors moved toward safety plays, and utilities .GSPU and telecommunications .GSPL both fell just 0.2 percent.

Joy, who helps oversee $571 billion in assets, said he has been cutting exposure to economically sensitive stocks to a more market-neutral position over the last two months.

The Dow Jones industrial average .DJI dropped 156.21 points, or 1.20 percent, to 12,852.32. The Standard Poor’s 500 Index .SPX fell 17.37 points, or 1.27 percent, to 1,352.21. The Nasdaq Composite Index .IXIC lost 43.58 points, or 1.47 percent, to 2,914.18.

Dow component McDonald’s Corp (MCD.N) fell nearly 2 percent to $93.68 after April same-store sales missed expectations. Another Dow member, Walt Disney Co (DIS.N) was scheduled to report results after the bell. It was down 0.7 percent to $43.52.

Market losses mirrored trading in Europe, where the FTSEurofirst .FTEU3 closed down 1.7 percent. French and UK stocks as measured by the CAC 40 and the FTSE 100 turned negative for the year.

Leftist leader Alexis Tsipras began efforts to form a Greek government by renouncing the terms of an international bailout and threatening to nationalize banks.

Meanwhile, the threat of a Franco-German split over policies to tackle the region’s debt crisis loomed after anti-austerity Socialist Francois Hollande was elected French president.

“This is dragging the situation out even longer and makes it less likely that the progress that has already been made will continue,” said Mark Foster, who helps manage $500 million at Kirr Marbach Co in Columbus, Indiana.

While Foster said the weakness has created some bargains, “a lot of major U.S. companies have a lot of exposure to Europe and we may continue seeing that weakness show up here.”

Earnings season has given investors less and less reason to be positive as the number of companies beating expectations tailed off sharply from the early stages. And companies that topped expectations have generally not raised their outlooks in a sign of caution.

With 434 of SP 500 companies reporting results as of Tuesday morning, 66.8 percent exceeded estimates, according to Thomson Reuters data. At the start of the earnings season, more than 80 percent had beaten expectations.

Fossil Inc (FOSL.O) tumbled 37 percent to $79.24, its biggest one-day decline since 1995. The fashion accessories maker’s revenues missed expectations and it cut its full-year profit view.

Electronic Arts Inc (EA.O) dropped 6.5 percent to $14.15 a day after forecasting revenue below estimates.

(Additional reporting by Ryan Vlastelica and Rodrigo Campos; editing by Jeffrey Benkoe)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/iP6P66ZcS9o/us-markets-stocks-idUSBRE83T09920120508