Shares in the Lowe’s Companies, the home improvement retailer, dropped 3.6 percent after it cut its full-year earnings forecast. NYSE Euronext shares tumbled 13 percent after the Nasdaq OMX Group and IntercontinentalExchange withdrew their takeover bid for their rival.
The Standard Poor’s 500-stock index dropped 0.6 percent, to 1,329.47. The Dow Jones industrial average slipped 47.38 points, or 0.4 percent, to 12,548.37. The Nasdaq fell 46.16 points, or 1.6 percent, to 2,782.31. The Dow and the S. P. had risen early before slipping.
“There’s concern about a soft spot,” said Burt White, the chief investment officer at LPL Financial in Boston. “We are starting to see a peak in manufacturing and margins. In addition, there’s the European debt crisis. They’ve been trying to deal with the symptoms, without curing the disease. It’s not an easy fix. The market has had a big run, with both stocks and commodities up a lot. The bigger the party, the tougher the hangover.”
While the S. P. 500 has rallied 5.8 percent since its year-to-date low on March 16, the gains have been led by so-called defensive industries that are thought to hold up better during an economic slowdown. Health care companies, consumer firms that sell necessities, telephone operators and utilities have risen at least 9.9 percent. Financial and energy companies have been the worst performers.
European finance chiefs endorsed a 78 billion euro ($111 billion) bailout for Portugal. Authorities stepped up the pressure on Greece to sell assets and deepen spending cuts to win an increase of its 110 billion euro ($156 billion) aid package and more time to repay the loans.
In deliberations clouded by the absence of Dominique Strauss-Kahn, the International Monetary Fund managing director, Europe’s rich countries also weighed whether to make holders of Greek bonds assume some losses. The I.M.F. named John Lipsky as acting managing director on Sunday after Mr. Strauss-Kahn was arrested in connection with the reported sexual attack of a hotel maid in New York. Mr. Strauss-Kahn, 62, has denied the charges and will plead not guilty, his lawyer Benjamin Brafman said.
Bill Gross, who runs the bond fund at Pacific Investment Management Company, said Greece was the world’s biggest candidate for default.
“We suggest that Greece is insolvent and that at some point the can cannot be kicked down the road any further,” Mr. Gross said in an interview on Bloomberg TV. “Ultimately debtholders will have to bear some of the burden as well.”
Stocks also fell as a report showed that manufacturing in the New York region expanded at a slower pace than anticipated in May as the cost of raw materials surged. The Federal Reserve Bank of New York’s general economic index fell to 11.9 from a one-year high of 21.7 in April. Economists in a Bloomberg News survey had projected it would drop to 19.6, according to the median forecast. Readings greater than zero signal growth.
NYSE Euronext shares fell 13 percent to $35.73. Nasdaq and ICE withdrew their bid for NYSE Euronext after talks with regulators showed they would not win antitrust approval, clearing the path for Deutsche Börse.
Shares of AMR, the parent company of American Airlines, gained 4.9 percent to $6.69, while JetBlue shares rose 5.6 percent to $6.14. JPMorgan Chase raised its recommendation for the carriers to overweight, from neutral.
UBS lifted estimates for combined profit by companies in the S. P. 500 for this year and 2012 on productivity growth, share buybacks, rising oil prices and strength in emerging markets.
The Treasury’s 10-year note rose 7/32, to 99 26/32. The yield fell to 3.15 percent, from 3.17 percent late Friday.
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