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Stocks fell on Friday,capping off their worst month in over a year as a downgrade by Fitch of Spain8217;s credit rating reignited worries about euro-zone debt issues.
The downgrade was the latest setback in a month in which the Samp;P 500 fell more than 8 per cent on concerns the euro-zone debt woes would escalate into a global financial crisis.
8220;It definitely spooked the market,no doubt about it,8221; said Terry Morris,senior equity manager for National Penn Investors Trust Company in Reading,Pennsylvania.
8220;Up until now it8217;s been mostly Greece and the threat of Spain and Portugal and Ireland. With Fitch actually downgrading Spain,it seems as if it is no longer a hypothetical,the contagion is now real.8221;
Fitch cut Spain8217;s credit rating by one notch,saying the country8217;s economic recovery will be more muted than the government forecast due to its austerity measures.
U.S.-listed shares of Spain8217;s Banco Santander SA fell 2.7 per cent to 10.15.
For the month,the Dow fell 7.9 per cent,the Samp;P shed 8.2 per cent and the Nasdaq lost 8.3 per cent. The declines were the worst for the Dow and Samp;P since February 2009 while the Nasdaq suffered its worst monthly drop since November 2008.
The Dow Jones industrial average .DJI dropped 122.36 points,or 1.19 per cent,to 10,136.63. The Standard amp; Poor8217;s 500 Index .SPX fell 13.65 points,or 1.24 per cent,to 1,089.41. The Nasdaq Composite Index .IXIC declined 20.64 points,or 0.91 per cent,to 2,257.04.
For the week,the Dow edged 0.6 per cent lower,the Samp;P 500 gained 0.2 per cent and the Nasdaq added 1.3 per cent.
The downgrade follows similar cuts in ratings earlier this month of Greece and Portugal as those nations attempt to grapple with debt problems by implementing austerity measures.
8220;The concerns about austerity programs are real,they are still there,8221; said Karl Mills,president of Jurika,Mills amp; Keifer Investment Partners in Oakland,California.
8220;Some days you don8217;t think of it and you can breed a sense of complacency,and some days it matters a lot.8221;
The downgrade pushed Wall St lower as stocks had fallen earlier after data showed consumer spending was unexpectedly flat last month and growth of U.S. Midwest business activity slowed more than expected.
Data from the Commerce Department showed April was the first month since September that consumer spending did not increase,but the largest gain in real disposable income in nearly a year gave hope that spending will resume in coming months.
A separate report showed business activity in the Midwest grew less than expected in May after scaling a five-year high in April. An employment gauge in the Institute for Supply Management-Chicago8217;s survey slipped.
Investors also took advantage of the opportunity to book gains before a long holiday weekend and after a rally in the previous session. U.S. markets will be closed on Monday for the Memorial Day holiday.
Energy shares ranked among the biggest losers,a day after the Samp;P energy index .GSPE racked up its largest gain in 14 months. The Samp;P energy index lost 2 per cent. Halliburton tumbled 8 per cent to 24.83 and Schlumberger fell 6.1 per cent to 56.15.
The U.S.-listed shares of BP Plc shed 5.4 per cent to 42.95 after the company8217;s chief executive officer said some progress had been made in its bid to plug the leaking Gulf of Mexico oil well,though it could still take 48 hours to conclude whether it has been fully successful.
Apple Inc was among the few bright spots,rising 1.5 per cent at 257.16 after the iPad tablet computer debuted outside the United States and Bank of America-Merrill Lynch raised its price target on the stock by 25 to 325.
The Thomson Reuters/University of Michigan Surveys of Consumers showed consumer sentiment rose a bit in May from April but was roughly unchanged from levels since February,while the one-year inflation expectations index also climbed to its highest since October 2008.
Volume was light with about 9.06 billion shares traded on the New York Stock Exchange,the American Stock Exchange and Nasdaq,below last year8217;s estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2071 to 968,while on the Nasdaq,decliners beat advancers by about 1819 to 844.
