Markets in a 'bad mood' as S&P 500 gives back year's gains

The S&P 500 wiped out its gains for the year Wednesday as banks sank after reporting earnings while a drop in retail sales reignited concern about the economy and a second health worker in Texas caught Ebola. KeyCorp retreated 8.9%, the biggest drop in the S&P 500, after the lender's quarterly revenue trailed analysts estimates. Bank of America Corp. sank 5.3% after revenue declined. A group of bank shares in the S&P 500 lost 4.7%, the most since 2012. Intel Corp., JPMorgan Chase & Co. and Boeing Co. fell more than 3.8% to lead the Dow Jones Industrial Average to its biggest drop in almost two years. The S&P 500 tumbled 2.3% to 1,834.07 at 1:55 p.m. in New York and lost as much as 3%, its worst intraday retreat since 2011. The index is down 0.7% for the year and has lost 8.8% since a record on Sept. 18. The Dow fell 384.67 points, or 2.4% to 15,930.52. The Nasdaq Composite Index sank 1.9%. “The economy isn't as strong as perhaps everyone thought,” Bruce Bittles, chief investment strategist at Milwaukee-based RW Baird & Co., which oversees $110 billion, said in a phone interview. “The concern here is that the weakness in Europe and Asia is going to be exported to the U.S. and our economy is going to be negatively impacted.” The Chicago Board Options Exchange Volatility Index, the benchmark gauge of options prices known as the VIX, jumped 32% to 30.08, the highest level since 2011, amid demand for protection against losses in equities. All but 14 stocks in the S&P 500 retreated today and each of its 10 main industry groups declined at least 1.%. Trading volume for stocks in the index was double the 30-day average at this time of day. Retail sales in the U.S. dropped more than forecast in September, decreasing 0.3% after a 0.6% gain in August that was the biggest in four months, Commerce Department figures showed. The median forecast of 81 economists surveyed by Bloomberg called for a 0.1% decline. Another report today showed manufacturing in the Federal Reserve Bank of New York's region slowed more than projected in October. The bank's so-called Empire State index dropped to 6.2 this month from an almost five-year high of 27.5 in September. Readings greater than zero signal growth. Concern about the spread of Ebola has also started to affect investor psychology, contributing to a 20% decline in U.S. airline stocks since a high in September and contributing to plunges in broader averages. A second health-care worker in Texas tested positive after caring for an Ebola patient, opening new questions about oversight lapses. “You have more concerns about Ebola, Empire manufacturing and retail sales numbers were quite poor, and even some earnings have been disappointing,” Matt Maley, an equity strategist at Miller Tabak & Co in Newton, Mass. said in a phone interview. Financial stress is rising, according to gauges maintained by the Federal Reserve Banks of Chicago and St. Louis, as well as measures compiled by Goldman Sachs Group Inc. and Bank of America Merrill Lynch. The deterioration reflects tightening credit conditions for companies, higher stock-market volatility and a stronger dollar. “The market was already in a bad, bad mood ahead of the largely known weakness in retail sales this morning,” Andrew Wilkinson, chief market analyst at Interactive Brokers, wrote in a note today. “Even the best report of the year would have failed to make much impact on investor sentiment captivated by signs of the bear and other factors such as the spread of the Ebola virus.” KeyCorp reported that net income slid 13 percent to $197 million, or 23 cents a share, from $229 million, or 25 cents, a year earlier. Noninterest expense of $704 million was higher than some analysts predicted and Chief Executive Officer Beth Mooney said its acquisition of Pacific Crest Securities LLC last month added to expenses. Bank of America lost 5.3%, the most since April, to $15.64. Revenue slid 4.3% to $21.2 billion. Noninterest expenses rose 20% to $19.7 billion because of a record $16.7 billion settlement with the government over mortgage probes. “The market is transitioning from fear to outright panic,” Gene Peroni, portfolio manager at Advisors Asset Management Inc. in Conshohocken, Pennsylvania, said in a phone interview. His firm oversees about $14.7 billion in assets. “They're selling things very much across the board, seems to be urgent. We're moving toward the bottom of the market correction. We're probably not quite there yet, but this is a necessary precursor to a bottom, that is, to have this type of panic, selling frenzy.”