(Bloomberg) — U.S. stocks fell, with the Standard & Poor’s 500 Index sinking the most in eight weeks, as equities resumed a selloff that began earlier this week after signs of financial stress in Portugal fueled demand for haven assets.
Pandora Media Inc. and Facebook Inc., which trade at more than 85 times reported earnings, tumbled at least 2.5 percent amid concern valuations in Internet and small-cap stocks have risen too far too fast. Goldman Sachs Group Inc. and JPMorgan Chase & Co. retreated more than 1.3 percent to pace losses among financial firms.
The S&P 500 lost 1 percent to 1,953.52 at 9:47 a.m. in New York, the most since May 15. The Dow Jones Industrial Average slid 170.05 points, or 1 percent, to 16,815.56. The Russell 2000 Index of small companies sank 1.8 percent, while the Nasdaq Composite Index plunged 1.5 percent.
“People will shoot first and ask questions later when news like this hits,” said Lawrence Creatura, a fund manager at Federated Investors Inc. in Rochester, New York. His firm manages about $363.8 billion. “The concern of an event like this is always determining whether it’s occurring in isolation or whether it’s the first domino. It’s a classic flight to safety across the equity, commodities and bond markets.”
European stocks and Portuguese bonds tumbled with investor concern deepening over missed debt payments by a company linked to the Iberian nation’s second-largest lender. Portugal’s central bank said Banco Espirito Santo SA is protected after its parent missed the payments. U.S. Treasuries and gold rallied.
The Chicago Board Options Exchange Volatility Index spiked 8.6 percent today to 12.65, the highest since June 17. The gauge known as the VIX finished last week at a seven-year low before rallying 16 percent during the first two days of the week, the biggest surge since April.
Internet, small-cap and biotechnology stocks plunged today, as investors resumed selling the biggest winners during the five-year bull market.
Twitter Inc. sank 3.4 percent to a one-month low, while Netflix Inc. lost 2.6 percent for a fourth day of declines to pace losses in the Dow Jones Internet Composite Index.
The Nasdaq Biotechnology Index dropped 1.7 percent as all but one of its 121 members declined. The selloff this week came after the Russell 2000 had recovered nearly all its losses from a two-month slide to come within a point of an all-time high. Gauges of Internet and biotechnology companies also had climbed back from their lows for the year, retracing more than half of their earlier losses.
The sectors were the biggest victims of the market selloff earlier this year on concern that valuations advanced too far. The Nasdaq Composite Index trades at 35 times reported earnings, about double that of the S&P 500.
U.S. benchmark indexes ended last week at all-time highs, with the Dow topping 17,000 for the first time, as the latest government payrolls report showed job growth blew past expectations last month and the unemployment rate fell to the lowest level since before the financial crisis peaked six years ago.
A report today showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign the job market continues to strengthen.
Minutes of the Federal Reserve’s June meeting, released yesterday, showed officials have agreed they’ll end their asset- purchase program in October if the economy holds up. At the same time, the policy makers said the central bank should continue to support favorable financial conditions needed to sustain growth, according to the minutes.
“It’s all about Portugal and the fears rippling through Europe,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “Everyone’s going to be in a de-risking mentality today, which is certainly not good. It’s sell first and ask questions later, which is what you see going on.”
More than 140 companies in the S&P 500, including Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs and Johnson & Johnson, will report quarterly results between now and July 23, according to data compiled by Bloomberg.
Profit at S&P 500 companies probably rose 5 percent in the three months through June, while sales gained 3 percent, estimates show. The forecasts have decreased from the start of April, when analysts predicted a 7.3 percent jump in earnings and 3.7 percent sales increase.
The S&P 500 has not had a drop of 10 percent in more than two years. The gauge trades at a valuation of 18 times reported earnings, the highest since 2011 when it was in the middle of a 19 percent slide, its biggest during the current five-year bull market.
–With assistance from Inyoung Hwang in London.