Stocks, Commodities Drop as Alcoa Results Spur Economy Concerns
By Michael P. Regan and Rita Nazareth
April 13 (Bloomberg) -- Stocks and commodities fell as disappointing sales at Alcoa Inc. and UBS AG’s downgrade of regional U.S. banks called into question the strength of the economic rebound.
The Standard & Poor’s 500 Index lost 0.5 percent and the Dow Jones Industrial Average retreated below 11,000 at 11 a.m. in New York as commodity producers and lenders led declines. The MSCI World Index slipped 0.6 percent. Oil dropped for a fifth day, falling below $83 a barrel, on forecasts for gains in supplies. The S&P/GSCI Index of raw materials tumbled 0.9 percent as aluminum, copper and gold fell.
Alcoa, the largest U.S. aluminum maker, reported first- quarter sales that missed analysts’ estimates as the U.S. earnings season began after a 7.3 percent rally in the S&P 500 this year. Developed economies face the risk of deflation as growth slows and central banks end programs to revive financial systems, said Mihir Worah at Pacific Investment Management Co., the biggest holder of inflation-protected Treasuries.
“People are watching the earnings reports to get a better idea about the state of the economy,” said Mark Bronzo, an Irvington, New York-based money manager at Security Global Investors, which oversees $21 billion. “Investors today are reacting to Alcoa’s numbers. There’s also some nervousness that stocks have had a big run-up going into the earnings season.”
Earnings Season
Alcoa slid 2.5 percent for the biggest loss in the Dow, while Huntington Bancshares Inc. and KeyCorp posted two of the three largest drops in the S&P 500 after UBS cut the shares to “sell” and said earnings at regional lenders will disappoint investors.
Combined profit for S&P 500 companies will increase 30 percent in the first quarter from a year earlier, the first back-to-back quarterly profit gains among U.S. companies since 2007, according to analyst estimates compiled by Bloomberg.
The S&P 500 has jumped 76 percent from a 12-year low in March 2009 as the economy returned to growth and the Federal Reserve kept its benchmark interest rate near zero to safeguard the recovery. As a result the benchmark’s valuation is about 19 times reported earnings, the highest level so far this year.
Intel Corp. reports results after the close today, followed this week by JPMorgan Chase & Co., Bank of America Corp. and General Electric Co.
The trade deficit in the U.S. widened in February more than anticipated as imports climbed. The gap increased 7.4 percent to $39.7 billion from a revised $37 billion the prior month, the Commerce Department said. Imports climbed 1.7 percent as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008.
Resources Drop
The MSCI Asia Pacific Index fell 0.5 percent. Alumina Ltd., Alcoa’s venture partner, slumped 5.6 percent in Sydney. Powerchip Semiconductor Corp. slumped 6.9 percent in Taipei on share-sale plans. China Southern Airlines Co. sank 3.2 percent on concern the nation may delay an immediate appreciation of its currency.
The Stoxx Europe 600 Index lost 0.5 percent. Antofagasta Plc, which will mine about a 10th of Chile’s copper this year, fell 2.8 percent in London. Heineken NV slid 2.5 percent in Amsterdam after JPMorgan Chase & Co. recommended selling the shares. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, surged 1.7 percent in Paris after reporting first-quarter sales that beat analysts’ estimates.
The euro snapped a three-day advance against the dollar after Greece sold Treasury bills in its first debt auction since it got an international aid pledge over the weekend to help it avoid default. The yield on Greece’s 10-year debt climbed 8 basis points to 6.75 percent after tumbling 48 basis points yesterday. Greece’s ASE equities index slid 2.2 percent.
LME Metals
Aluminum for delivery in three months fell 0.2 percent to $2,412 a metric ton on the London Metal Exchange. Copper, nickel and zinc also retreated. Gold for immediate delivery declined for a second day, dropping 0.7 percent to $1,147.85 an ounce.
Oil fell for a fifth day, its longest losing streak since Jan. 15, amid forecasts of an 11th consecutive weekly gain in U.S. crude supplies and as the International Energy Agency boosted its forecast for non-OPEC supply. Crude oil for May delivery dropped $1.58 to $82.76 a barrel in electronic trading on the New York Mercantile Exchange.
The MSCI Emerging Markets Index dropped for a second day, falling 0.9 percent as shares of oil producers including Russia’s OAO Lukoil and China’s Cnooc Ltd. retreated. The South Korean won weakened 0.6 percent against the dollar on speculation the central bank sold the currency to boost export earnings.
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