U.S. stocks fell, reversing course after the Standard & Poor’s 500 Index reached a one-month high, as declining retailer and technology shares outweighed China’s decision to end its currency’s fixed rate to the dollar.
Home Depot Inc. and Target Corp. led chain stores to the biggest decline among 24 groups in the Standard & Poor’s 500 Index amid concern a stronger yuan will make it more expensive to import goods from China. Apple Inc., whose iPhones and iPads are made in China, lost 1.4 percent. Amazon.com Inc. slid 2.6 percent after the online bookseller cut prices for its Kindle electronic reader.
The S&P 500 lost 0.4 percent to 1,113.20 as of 4 p.m. in New York, wiping out an earlier advance of 1.2 percent. The Dow Jones Industrial Average decreased 8.23 points, or 0.1 percent, to 10,442.41. The losses in U.S. stocks weren’t enough to erase a gain in the MSCI World Index, with the gauge of 24 developed markets rising for a 10th day, the longest streak in 11 months.
“The Chinese peg loosening is a tightening step, not a reason to buy risky assets,” said Barry Knapp, the head of U.S. equity strategy at Barclays Plc in New York. “Chinese growth is strong in export regions, labor costs are rising, real estate in those areas is rising, consumer price inflation is rising. The primary catalyst to allow the currency to rise against the dollar is to ease those pressures by slowing exports.”
Stocks rallied around the world earlier after the People’s Bank of China pledged on June 19 to make the yuan more flexible, while ruling out a one-time revaluation of the currency that’s been held at about 6.83 yuan per dollar since mid-2008. The global economy is “gradually recovering and the upturn in the Chinese economy has become more solid,” it said in a statement announcing the action
U.S. stocks completed their biggest two-week rally since November on June 18. The S&P 500 has jumped 6 percent since June 7, including a 3 percent increase the day China said exports rose the most in six years. Investors are counting on the Asian economy, which expanded 11.9 percent in the first quarter, to help sustain worldwide growth after concern about Europe’s sovereign credit crisis sent the Dow Jones Industrial Average to its worst May retreat since 1940.
The failure of S&P 500 to hold above levels monitored by analysts is sending a bearish signal to traders who base day-to- day decisions on whether to buy or sell price charts.
Looking at Charts
The benchmark index for U.S. stocks rose to 1,131.23 today before reversing course and falling to 1,113.20 at 4 p.m. in New York. The rally fizzled above 1,120.84, the level marking a 50 percent recovery of its October 2007 to March 2009 plunge, and 1,130.29, the midpoint of its intraday highs and lows in 2010.
“Given the lack of economic or earnings news, people try to fill in the void with whatever they can and are probably more likely to look at the charts,” said Bruce McCain, chief investment strategist at Cleveland-based Key Private Bank, which manages $25 billion.
An appreciation of the yuan, also known as the renminbi, will benefit exporters and Chinese employment more than it hurts them, the central bank said in a statement. A more flexible currency would also help to curb consumer-price gains, asset bubbles and dependence on exports for growth, it said.
“While positive for equity market sentiment, the currency appreciation is likely to squeeze profit margins among exporters, although we think they will be more aggressive in passing through cost pressures to retailers,” Tao Dong, an economist at Credit Suisse Group AG, wrote in a report today. “Over the coming decade, we think China is likely to export inflation instead of deflation to the rest of the world.”
Retailers had the biggest decline in the S&P 500 among 24 industries, falling 1.7 percent.
Home Depot fell 1.6 percent to $31.43, the second-biggest drop in the Dow. Target fell 1.5 percent to $52.89.
Amazon.com retreated 2.6 percent to $122.55. The world’s largest online merchant cut the price of its Kindle eReader to $189 from $259, according to its website.
Technology shares in the S&P 500 fell 0.8 percent.
Apple retreated 1.4 percent to $270.17. Apple has said most of its products -- including the iPhone, Mac and iPod media player -- are manufactured by companies in China.
Research In Motion Ltd. slumped 3.6 percent to $58.84. The BlackBerry maker may miss Goldman Sachs Group Inc.’s first- quarter profit forecast because of competition from devices using Google Inc.’s Android software, analyst Simona Jankowski wrote in a report today.
BP Plc dropped 4.5 percent to $30.33. The London-based operator of the leaking well in the Gulf of Mexico would face an extra $500 million a year in interest costs to raise $10 billion in the bond market as it seeks to ensure it has enough cash to cope with its oil spill. The average yield on BP’s bonds has surged to 539 basis points from 41 basis points before the oil- rig explosion on April 20, according to Bank of America Merrill Lynch index data.
MasterCard Inc. and Visa Inc. rallied as U.S. Representative Barney Frank, the leader of talks to produce a final regulatory overhaul bill, will seek to maintain the Senate’s proposed cap on debit-card “swipe” fees with some changes, according to his office.
The fees U.S. merchants paid last year to accept Visa and MasterCard debit cards totaled $19.7 billion and averaged 1.63 percent of each sale, according to the Nilson Report, an industry newsletter. Visa advanced 5 percent to $80.90. MasterCard rose 4.2 percent to $223.34.