U.S. Stocks Fall, Treasuries Rally on Fed's Economic Outlook
A pedestrian looks at an electronic stock board outside a securities firm in Tokyo. Photographer: Kimimasa Mayama/Bloomberg
July 14 (Bloomberg) -- Intel Corp. Chief Financial Officer Stacy Smith talks with Bloomberg's Susan Li from Santa Clara, California, about the outlook for sales. Intel, the world's biggest chipmaker, reported record second-quarter sales and topped analysts' estimates with its forecast for this period, allaying concern that a rebound in technology spending is losing steam. Smith also discusses the company's investments in China. (Source: Bloomberg)
July 14 (Bloomberg) -- Sean Callow, a currency strategist at Westpac Banking Corp, talks with Bloomberg's Linzie Janis about European Union stress tests for banks and the outlook for the euro. The euro rose for a second day versus the yen after Greece sold Treasury bills at an interest rate below the 5 percent charged by the European Union when it rescued the nation from default. Callow speaks from Sydney. (Source: Bloomberg)
Treasuries surged, snapping the 10- year note’s longest losing streak in 11 months, while most U.S. stocks fell and oil erased gains as the Federal Reserve said it sees no need for additional economic stimulus measures even as it trimmed its growth outlook.
The 10-year Treasury yield slid eight basis points to 3.05 percent as the benchmark government security climbed for the first time in six days. The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,095.17 at 4 p.m. in New York, halting a six-day rally, as four stocks retreated for every three that rose on U.S. exchanges. Benchmark equity indexes for Canada and Brazil declined more than 0.3 percent as oil erased a gain of as much as 1.3 percent.
U.S. equity indexes fell to their lows of the day after minutes from the Fed’s last meeting indicated that U.S. central bankers were concerned about lingering high unemployment and risks that inflation could decelerate further. The S&P 500 erased a midday advance that was led by technology companies as Intel Corp. surged after forecasting a record full-year profit.
“The Fed threw a little cold water on the earnings-driven market recovery,” said Don Wordell, a fund manager for Atlanta- based RidgeWorth Capital Management, which oversees about $62 billion. “They have brought down their expectations for growth and become more cautious, that’s probably shocking some people.”
Fed Growth Forecast
U.S. central bankers lowered their central tendency forecast for 2010 growth to a range of 3 percent to 3.5 percent versus 3.2 percent to 3.7 percent in April, the minutes show. They also trimmed their outlook for inflation this year to a range of 1.0 percent to 1.1 percent, down from 1.2 percent to 1.5 percent in April. The minutes showed the economy may not recover fully to its “longer-run path” for five to six years.
Cisco Systems Inc., Intel and Hewlett-Packard Co. rose at least 1.2 percent to lead the Dow Jones Industrial Average to a three-week high.
Banks in the S&P 500 slumped 1.5 percent as a group for the biggest decline among 24 industries before JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. report earnings later this week. Retailers in the index lost 0.8 percent after the Commerce Department said purchases decreased 0.5 percent in June, more than projected.
Gains in Treasuries also came as the U.S. auctioned $13 billion of 30-year bonds at a lower-than-forecast yield of 4.08 percent.
Treasury Yields
The yield on the 30-year bond dropped 7 basis points, or 0.07 percentage point, to 4.03 percent. The yield on the benchmark 10-year note fell 8 basis points to 3.05 percent.
Crude oil retreated in the last half-hour of floor trading in New York, reversing a gain of 1.3 percent. Oil for August delivery dropped 11 cents to $77.04 a barrel.
Gold fell in New York on sales by some investors after prices gained the most in three weeks. The metal, which yesterday climbed 1.2 percent for its biggest advance since mid- June, lost $6.50, or 0.5 percent, to $1,207 an ounce today on the Comex in New York.
European stocks closed little changed after a six-day rally pushed valuations to the highest level in two months. ICAP Plc led declining shares after saying trading volumes “slowed significantly” in June. BP Plc fell 2.3 percent as the company delayed testing of a new cap placed over its leaking Gulf of Mexico oil well.
The Stoxx Europe 600 Index slipped less than 0.1 percent, paring earlier losses in the final hour of trading. The measure had risen 8.2 percent over the previous six days, leaving the gauge trading at more than 16 times its companies’ reported profits, the highest valuation since May, according to Bloomberg data.
The euro rose 0.1 percent to $1.2739 after climbing as much as 0.4 percent versus the dollar earlier.
The MSCI Asia Pacific Index jumped 1.5 percent. Samsung Electronics Co., Asia’s biggest maker of semiconductors, climbed 3.5 percent in Seoul. Toyota Motor Corp., the world’s largest automaker, gained 4 percent in Tokyo. DBS Group Holdings Ltd., Southeast Asia’s largest lender, rose 1.8 percent in Singapore.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.
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