Stocks Fall, Erasing Early Rally; Gold Drops as Dollar Rebounds
EBay rallied 7.4 percent in German trading. Photographer: Tony Avelar/Bloomberg
Oct. 21 (Bloomberg) -- Jim Rogers, chairman of Rogers Holdings, talks about his investment strategy for commodities and the outlook for the Chinese economy. Rogers speaks from Singapore with Andrea Catherwood on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Oct. 21 (Bloomberg) -- Richard Clarida, global strategic adviser at Pacific Investment Management Co., discusses the potential impact of so-called quantitative easing by the Federal Reserve on the U.S. economy. Clarida, speaking with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack," said the expansion of asset purchases will help lower interest rates but questions whether it can generate long-term economic growth. (Source: Bloomberg)
U.S. stocks retreated, erasing an earlier advance, as concern that mortgage-related losses will worsen wiped out a rally in financial companies while a rebound in the dollar weighed on commodities.
The Standard & Poor’s 500 Index lost 0.3 percent to 1,174.65 at 2:36 p.m. in New York, wiping out a 1 percent rally triggered earlier by higher-than-estimated profit at companies such as EBay Inc. The Dollar Index rose 0.4 percent after falling as much as 0.4 percent. Oil slid 1.5 percent as refining in China grew the least in 18 months amid government steps to cool growth. Gold lost 1.6 percent to $1,322.20 an ounce.
The Dow Jones Industrial Average turned lower after rising above its highest close since the week of Lehman Brothers Holdings Inc.’s bankruptcy in September 2008. Bank of America Corp., facing demands for refunds from mortgage-bond holders, tumbled 3 percent to a 16-month low. Financial shares extended losses as a government report said Fannie Mae and Freddie Mac, the mortgage-finance companies under U.S. conservatorship, may need as much as $363 billion in aid through 2013.
“The market is a little tired,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “We’ve had a big move. We need to digest that. Commodities have done very well and we’re seeing a big pullback. And there’s concern about bad loans hitting banks. The long that fear is there, the worse it is for the market.”
The S&P 500 has rallied 15 percent from its 2010 low in July as investors speculated the Federal Reserve will pump more cash into the economy and earnings topped analyst estimates at 86 percent of the companies in the index that have reported third-quarter results since Oct. 7.
Earnings Season
EBay, owner of the second most-visited e-commerce site, surged 7.2 percent after its fourth-quarter sales and earnings forecasts also exceeded estimates.
The S&P 500 rose 1.1 percent yesterday after the Fed said in its Beige Book business survey that the economy grew at a “modest pace” in September, while results at Boeing Co. and Yahoo! Inc. surpassed analysts’ projections.
Initial jobless claims fell last week by 23,000 to 452,000, a level that’s consistent with little improvement in the labor market, Labor Department figures showed today. The Conference Board’s gauge of the outlook for the next three to six months rose 0.3 percent, matching the median estimate of economists in a survey. A Federal Reserve gauge of manufacturing in Philadelphia trailed estimates.
Europe, Emerging Markets
Three stocks rose for every one that fell in the Europe Stoxx 600 Index, which climbed 0.6 percent. Nokia Oyj, the world’s biggest maker of mobile phones, jumped 6.3 percent. Fiat SpA, Italy’s largest manufacturer, gained 4.4 percent after increasing its outlook for full-year earnings. Pernod-Ricard SA, the maker of Chivas Regal whiskey and Absolut vodka, rallied 6.3 percent after reporting sales growth that beat estimates.
The MSCI Emerging Markets Index rose 0.2 percent, while the MSCI China Index advanced 0.9 percent. Russia’s Micex Index increased 2.3 percent to the highest in six months after the government said it plans to raise $59 billion through asset sales in the next five years to balance the budget. India’s Bombay Stock Exchange Sensitive Index added 2 percent.
The dollar strengthened against 14 of 16 major counterparts, erasing earlier losses versus the euro to advance 0.3 percent to $1.3921 against the shared currency. The dollar strengthened 0.2 percent to 81.22 yen after reaching a 15-year low yesterday.
‘Competitive Undervaluation’
Global finance ministers are planning to say members will refrain from “competitive undervaluation” of currencies to soothe trade tensions, an official from a G-20 country said, citing a draft statement and speaking on condition of anonymity.
Earlier gains in the euro came after an index of euro- region manufacturing industries rose more than predicted this month, data from Markit Economics showed today.
The British pound depreciated against 13 of 16 major peers, falling 1 percent to $1.5699. Chancellor of the Exchequer George Osborne said the Bank of England has freedom to use monetary- policy tools if the squeeze in fiscal policy hurts domestic demand. He also defended his deficit-cutting plan, saying to the BBC that “if we don’t take this path, then economic ruin lies ahead.” The pound extended declines as a report showed U.K. retail sales unexpectedly dropped in September for a second month.
The extra yield, or spread, that investors demand to hold Spanish 10-year bonds instead of similar-maturity benchmark German bunds rose four basis points to 1.66 percentage points after demand fell at a sale by the Iberian nation of 2025 bonds. Investors bid for 1.44 times the amount of Spanish securities offered, compared with a bid-to-cover ratio of 2.57 the last time the debt was sold on July 15.
Bond Spreads
The Greek-German spread widened 20 basis points to 6.79 percentage points, while the Portuguese-German 10-year gap increased nine basis points to 3.38 percentage points. The Irish 10-year-bund spread rose 15 basis points to 4.03 percentage points. The yield on the 10-year German bund rose four basis points to 2.48 percent.
Rice for January delivery rose on concern that stronger demand and crop losses may curb global supply.
Arabica coffee rose to a 13-year high of $2.035 a pound in New York on concern that output may fall next year in Brazil and Colombia, the world’s two biggest growers of the variety. Robusta coffee reached a two-year high in London.
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