Stocks, Oil Retreat on Economy; Dollar Slips Versus Yen
U.S. stocks fell, Europe’s benchmarkequity index halted a six-day rally and the dollar slippedversus the yen as an unexpected drop in American durable-goodsorders added to evidence the economic recovery is slowing.
The Standard & Poor’s 500 Index lost 0.7 percent to1,106.12 at the 4 p.m. close in New York. The Stoxx Europe 600Index fell 0.4 percent. Oil slid to a one-week low as governmentdata showed an unexpected gain in U.S. inventories, and thedollar slid from the highest in almost two weeks versus the yen.Copper rose to an 11-week high on signs growth is sufficient inChina and the U.S. to spur demand. Treasuries rallied, sending10-year yields below 3 percent.
Nine of 10 industries in the S&P 500 fell after orders for U.S. goods meant to last at least three years dropped 1 percent in June, depressed by less demand for aircraft, government datashowed. Equities extended losses in the afternoon as theFederal Reserve said U.S. economic growth slowed in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers.
“The scars remain,” said David Rosenberg, chief economistat Gluskin Sheff & Associates Inc. in Toronto, in a radiointerview with Tom Keene on Bloomberg Surveillance. “Thetransition to the next sustainable economic expansion is usuallybetween five and seven years. The good news is that we finishedtwo years of this. The glass is half empty. There could bebetween three to five years to go.”
Dow Rally Halted
The drop in durable goods orders, which followed a bigger-than-forecast decrease in consumer confidence yesterday, addedto concern that the economic recovery is slowing even afterimproving corporate earnings triggered an 8.2 percent rebound inthe S&P 500 from a 10-month low on July 2.
“Economic activity has continued to increase, on balance,since the previous survey,” the central bank said today in itsBeige Book business survey, while noting that two of the Fed’s12 districts reported the economy “held steady” and two saidthe expansion slowed. The Dow Jones Industrial Average snapped a four-day streakof gains, falling 39.81 points, or 0.4 percent, to 10,497.88.Boeing Co. slid 1.9 percent to lead declines after second-quarter sales fell 9.2 percent to $15.6 billion, trailinganalysts’ estimates.
Earnings have topped analysts’ projections at about 81percent of companies in the S&P 500 that have reported resultssince July 12 and per-share profit has grown 54 percent,according to data compiled by Bloomberg. Sales have increased9.2 percent and topped estimates at 66 percent of 219 companies.
Crude oil for September delivery tumbled 0.7 percent to$76.93 a barrel on the New York Mercantile Exchange after theEnergy Department’s inventory report showed supplies surged by7.31 million barrels to 360.8 million in the week ended July 23.
Copper Rallies
Copper for September delivery climbed 1.2 percent to$3.2455 a pound in New York, the highest settlement price sincemid-May, and lead and zinc jumped at least 2 percent in London.
The gains in industrial metals came after the ShanghaiComposite Index of equities jumped 2.3 percent to a two-monthhigh as the central bank said China’s economic fundamentals are“good” and the U.S. Commerce Department’s durable-goods reportshowed that orders and shipments for nonmilitary capital goodsexcluding aircraft climbed 0.6 percent in June.
Wheat futures surged to a 13-month high and corn andsoybeans rose as drought damages crops in Russia, Ukraine andother parts of Europe, increasing demand for supplies from theU.S., the world’s biggest exporter. Wheat futures for Septemberdelivery jumped 3.4 percent to $6.155 a bushel in Chicago.Earlier, the price reached $6.2325, the highest level since June12, 2009.
Bond Auction
Treasury shorter-term securities led gains as thegovernment sold $37 billion of five-year notes in the smallestauction of the debt in a year, the second of three note salesthis week totaling $104 billion.
The 10-year Treasury yield slipped 5 basis points, or 0.05percentage point, to 2.99 percent. The yield on five-year notesslipped 9 basis points to 1.7 percent. The dollar slipped 0.5percent versus the yen, while gaining against 11 of its 16 othermost-traded counterparts.
Today’s auction drew a yield of 1.796 percent, comparedwith an average forecast of 1.820 percent in a Bloomberg Newssurvey of seven of the Fed’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids withtotal securities offered, was 3.06, compared with an average of2.66 for the previous 10 sales.
Default Swaps
A benchmark indicator of corporate credit risk in the U.S.rose, while holding near the lowest level in two months. Credit-default swaps on the Markit CDX North America Investment GradeIndex, which investors use to hedge against losses on corporatedebt or to speculate on creditworthiness, increased 2.6 basispoints to a mid-price of 105.1 basis points, according to indexadministrator Markit Group Ltd.
More than two stocks fell for each that advanced inEurope’s Stoxx 600. Yell Group Plc slumped 19 percent after thepublisher posted a drop in profit. Nexans SA lost 8.5 percentafter the world’s biggest maker of cables and wires reportednarrowing first-half margins. Safran SA and InfineonTechnologies AG climbed more than 2 percent after the companiesraised their earnings outlooks.
Japan’s Nikkei-225 Stock Average posted the biggest jumpamong major global equity indexes, rising 2.7 percent, afterTokyo-based Canon Inc., the world’s largest camera maker,reported earnings that beat analysts’ estimates.
