U.S. stocks drop on Europe concerns, Wal-Mart

France’s elections, Netherlands turmoil weigh on global markets

By Kate Gibson, MarketWatch

Last Update: 4:58 PM ET Apr 23, 2012

NEW YORK (MarketWatch) — U.S. stocks went into widespread retreat Monday as investors reacted to political uncertainty in Europe and a report alleging that Wal-Mart Stores Inc. hindered an investigation of bribery in Mexico.

 

Wall Street’s strong advance in the first quarter left it vulnerable to large hits to the downside, analysts say.

“The problem is the market accelerated so fast in the first quarter that it got ahead of itself. If the market were only up 6% in the first quarter, there wouldn’t be this red alert going out every time there was a headline out of Europe or one data point here,” said Ann Miletti, senior portfolio manager for Wells Fargo Advantage Funds.

The combination of some weaker-than-expected U.S. economic reports and the lack of clarity over Europe’s ability to get a handle over its sovereign debt has led to increased volatility, she added.

“The market is now wondering if Q1 was just a pull forward because of good weather,” according to Miletti, who cautioned against reading too much into a small window of indicators.

The Dow Jones Industrial Average  ended down 102.09 points, or 0.8%, at 12,927.17, with shares of Wal-Mart   hardest hit among the index’s 30 components. All but three stocks closed lower.

The discount retailer’s shares fell 4.7%, their worst day since August, after the New York Times reported that top executives at a subsidiary allegedly undertook a large-scale bribery campaign to construct stores across Mexico.

“These fines could be up toward $1 billion when you look at the crimes they are being accused of,” said Art Hogan, head of product strategy at Lazard Capital Markets.

 

The S&P 500 Index   declined 11.59 points, or 0.8%, at 1,366.94, with consumer staples battered the most among the index’s 10 industry groups. All closed with losses; energy performed the best.

Among the S&P’s top decliners, Kellogg Co.   shares tumbled 6.1% after the cereal maker cut its 2012 forecast.

SunTrust Banks Inc.  rallied 2.8%, making it the second-best S&P 500 performer, after the lender reported first-quarter profits that topped estimates.

The Nasdaq Composite Index  tumbled 30 points, or 1%, at 2,970.45. Apple Inc. , which makes up about 12% of the index, ended down 0.2% after a choppy day that extended the stock’s recent bout of volatility. Read more on talk of a decline in wireless-carrier subsidies for Apple’s iPhone.

For every stock advancing more than three fell on the New York Stock Exchange, where about 784 million shares traded. NYSE-listed shares traded across all exchanges were near 3.6 billion. Nasdaq composite volume was more than 1.7 billion.

After Tuesday’s closing bell, Apple is scheduled to report quarterly results.

“They haven’t had a disappointing earnings-reporting season in quite some time, and we doubt very much they are going to reverse that soon, unless of course something has structurally changed in the consumer-demand process,” said Hogan at Lazard Capital.

Shaky ground

French President Nicolas Sarkozy lost the first round of his re-election bid, with the politician facing an uphill battle in a May 6 runoff against François Hollande, the Socialist front-runner in Sunday’s balloting.

Hollande has vowed to renegotiate a deficit-cutting agreement touted by German Chancellor Angela Merkel that has yet to be ratified.

Discord over planned austerity also prompted Dutch Prime Minister Mark Rutte to offer his cabinet’s resignation.

French presidential elections could prove “disruptive to some of the work that both France and Germany and the entire EU have done to sort of stem the tide of the European sovereign-debt crisis,” commented Hogan.

Oil prices fell 0.7%, with the futures contract for June delivery   off 77 cents at $103.11 a barrel on the New York Mercantile Exchange. Gold prices retreated 0.6%, with the futures contract for June delivery  losing $10.20 to settle at $1,632.60 an ounce on the Comex division of Nymex. and

The dollar gained versus other global currencies , including the euro .

Treasury prices rallied, with the benchmark 10-year note yield  falling to 1.9413%.

“The still-loud calls for higher bond yields (and lower prices) have yet to actually happen, as the 10-year Treasury note remains around the 2% level, up slightly from year-end, but nowhere near the disaster that had been predicted,” wrote Paul Nolte, managing director at Dearborn Partners, in weekly commentary emailed Monday.

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