U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest decline of the year, as political uncertainty in Europe fueled renewed concern about the debt crisis and American factory orders rose less than forecast.
All 10 groups in the S&P 500 fell at least 0.4 percent. Chevron Corp. lost 1.1 percent after UBS downgraded its recommendation on the stock. Wal-Mart Stores Inc. dropped 1.7 percent as JPMorgan Chase & Co. cut its rating on the stock. Herbalife tumbled 4.5 percent after a report the company is under investigation by the Federal Trade Commission.
"It’s a little bit of a breather," Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.8 billion. "Italian, Spanish and Portuguese bond yields up a bit there and that’s partly causing it. Nevertheless, the market in the U.S. has been strong since the beginning of the year and we don’t see a whole lot to change that trend in the U.S."
The S&P 500 rallied 5 percent last month as lawmakers reached a budget compromise and companies reported better-than- estimated earnings. The Dow climbed above the 14,000-level last week for the first time since 2007, and is less than 2 percent away from its all-time high.
Yum! Brands Inc. and Sysco Corp. are among 13 companies in the S&P 500 that report earnings Monday. About 73 percent of the 259 companies from the gauge that have released results this earnings season have exceeded profit projections, and 66 percent have beaten sales estimates, according to data compiled by Bloomberg.
The Stoxx Europe 600 Index slid 1.5 percent Monday. Spanish Premier Mariano Rajoy is facing opposition calls to resign amid contested reports about illegal payments, while Deutsche Bank said this year’s rally in Italian, as well as Spanish, bonds may falter as Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month.
Spanish 10-year government yields jumped 23 basis points to 5.44 percent. Yields on similar-maturity Italian debt rose 15 basis points to 4.47 percent.
Orders placed with U.S. factories increased less than forecast in December, reflecting a drop in non-durable goods that overshadowed gains in construction equipment and computers. Bookings climbed 1.8 percent after a revised 0.3 percent drop in November that was initially reported as unchanged, figures from the Commerce Department showed Monday in Washington. The Bloomberg survey median called for a 2.3 percent gain.
The recent rally in U.S. stocks has made the benchmark S&P 500 look overvalued given the slow pace in the country’s economic recovery, Patrick Legland, Societe Generale’s head of research, wrote in a note. The "risk-on mode" may end soon with a lack of positive economic data, Legland wrote.
Technology, financial and consumer-discretionary companies fell the most out of 10 S&P 500 groups, losing at least 0.9 percent.
Chevron lost $1.24 to $115.26. UBS cut its recommendation on the second-largest U.S. energy company to neutral from buy, citing the stock’s recent rally. The shares have gained 7.7 percent this year.
Wal-Mart fell $1.21 to $69.28 as JPMorgan downgraded its rating on the stock to neutral from overweight, a rating similar to buy. The brokerage also reduced its price target for the stock to $75 from a previous estimate of $84.
Herbalife, the marketer of nutritional supplements that hedge-fund manager Bill Ackman has called a pyramid scheme, dropped $1.56 to $33.51. The company is the subject of a probe as the FTC revealed it received as many as 192 complaints over the past seven years, the New York Post reported, citing the FTC’s response to a freedom of information request.
Oracle Corp. slipped 2.6 percent to $35.28. The largest maker of database software agreed to buy Acme Packet Inc. for $1.7 billion, or $29.25 a share. Acme, a maker of devices that help transmit voice and data over Internet networks, surged 22 percent to $29.27.
Merck & Co. lost 2 percent to $41.01. The second-largest U.S. drugmaker was cut to underweight from equalweight by Morgan Stanley, which cited concern the company’s Improve-It study of cholesterol drug Vytorin may fail when interim data is reviewed in March, hurting chances for experimental drug anacetrapib.
Gannett Co. erased 5.3 percent for the biggest drop in the S&P 500 to $18.78. The owner of 82 U.S. daily newspapers and 23 television stations, fell the most in almost 10 months on concern that TV revenue growth won’t be enough to compensate for weakness in print advertising.
Sysco slumped 4 percent to $30.80. The distributor of food to restaurants, hospitals and schools reported second-quarter adjusted earnings that missed analysts’ projections by 1 cent.
Humana Inc. jumped 4.4 percent to $78.68. The health-care company reported fourth-quarter earnings of $1.19 a share, exceeding the $1.07 a share estimated by analysts on average.
U.S. options trading posted its second-best start to a year on record after the stock market rally to near-record highs drove investors to seek protection from losses.
An average of 17.2 million options traded daily in the U.S. in January, the highest level for the start of a year except for a record in 2011, according to the Options Clearing Corp. The volume represents an 8.2 percent increase from the full-year 2012 average.
Investors are taking advantage of the cheapest options in 5 1/2 years to protect against losses as the U.S. economy unexpectedly shrank in the fourth quarter and the S&P 500 reached its highest valuation in 18 months. Options trading has also increased as investors try to boost returns by selling contracts in order to collect a premium, according to Marko Kolanovic, global head of derivatives and quantitative strategy at JPMorgan Chase & Co.