By: Rita Nazareth
Oct. 28 (Bloomberg) — U.S. stocks fell, extending a global slump, as an unexpected decrease in new-home sales added to concern the seven-month rally in equities outpaced prospects for economic growth. The dollar rose against most major currencies and Treasuries gained, while oil and metals fell.
Alcoa Inc., General Electric Co. and Caterpillar Inc. dropped at least 2.5 percent to lead declines in the Dow Jones Industrial Average. Lennar Corp. and D.R. Horton Inc. tumbled more than 5 percent after the Commerce Department said sales of new homes fell 3.6 percent in September. European and Asian shares slid as companies from SAP AG to ArcelorMittal and Canon Inc. reported disappointing earnings.
The Standard & Poor’s 500 Index retreated 1.1 percent to 1,051.61 at 1:37 p.m. in New York. The Dow slipped 48.14 points, or 0.5 percent, to 9,834.03. The MSCI World Index of 23 developed nations lost 1.6 percent.
“The stock market is due for a correction,” said Hank Smith, who helps oversee $5.5 billion as chief investment officer of Haverford Trust Co. in Radnor, Pennsylvania. “Even though the economy has bottomed out, we’re still getting some disappointing numbers now and then. On the earnings front, a good deal of growth came in from cost cutting. Investors are using all that as an excuse to pull back.”
The S&P 500 has rallied 56 percent from a 12-year low on March 9 amid growing confidence a U.S. economic recovery will drive profit growth. The benchmark for U.S. equities has slipped 3.5 percent from this year’s high on Oct. 19 on speculation the seven-month rally has outpaced the prospects for earnings and economic growth.