Shares slump after Italy and Spain downgraded

Dow Jones:11,103.12 (-20.21) Nasdaq:2,479.35 (-27.47) S&P 500:1,155.46 (-9.51)

US STOCKS retreated, trimming a weekly advance for the Standard and Poor’s 500 Index, as concern Europe’s debt crisis will worsen overshadowed faster-than forecast growth in American employment.

Financial stocks had the biggest decline in the SP 500 among 10 industries, falling 3.7 per cent, after Fitch Ratings downgraded the debt of Italy and Spain. The Russell 2000 Index of smaller US companies lost 2.6 per cent after climbing 11 per cent in the previous three days, the biggest rally since March 2009.

Sprint Nextel tumbled 20 per cent after the company said it needs to raise additional capital as it spends on a network upgrade and new handsets.

The S&P 500 fell 0.8 per cent to 1,155.46 at 4pm New York time, trimming its weekly gain to 2.1 per cent. The index rose 6 per cent over the last three days. The Dow Jones Industrial Average slid 20.21 points, or 0.2 per cent, to 11,103.12.

“Investors are understandably nervous,” Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock, said in a telephone interview. His firm oversees $3.66 trillion as the world’s largest asset manager. “You don’t know what’s going to happen in Europe. The US economy is growing sufficiently slowly that it’s unlikely to bring the unemployment rate down, but it doesnt appear to be sliding back into a recession.”

The KBW Bank Index slid 4.3 per cent as all of its 24 stocks declined. The gauge had rallied 10 per cent over the last three days. Bank of America fell 6.1 per cent, the most in the Dow, to $5.90. Goldman Sachs decreased 5.4 per cent to $92.69. JPMorgan Chase lost 5.2 per cent to $30.70. The Morgan Stanley Cyclical Index of companies most-tied to the economy fell 1.5 per cent, afterrising 9.9 per cent in three days. The Dow Jones Transportation Average, a proxy for the economy, retreated 1.4 per cent. The index had risen 9.5 per cent over the last three days. Sprint tumbled 20 per cent, the most since December 2008, to $2.41. “Do we need to access the markets? Yes,” chief financial officer Joseph Euteneuer said at a meeting with investors in New York. “But we have flexibility on that timing,” he said, adding that Sprint has enough money to handle debt maturities through 2012. – (Bloomberg)