Stocks, Oil Fall on China Rates, Apple Outlook; Dollar Rallies
U.S. Stock Futures Fall on Apple Outlook
George Frey/Bloomberg
Apple, the maker of the iPad and the world’s third-biggest company, said after the close of trading yesterday that profit will be about $4.80 a share this quarter, less than the $5.03 estimate in a Bloomberg survey of analysts.
Apple, the maker of the iPad and the world’s third-biggest company, said after the close of trading yesterday that profit will be about $4.80 a share this quarter, less than the $5.03 estimate in a Bloomberg survey of analysts. Photographer: George Frey/Bloomberg
Oct. 19 (Bloomberg) -- Joseph McAlinden, fund manager at Catalpa Capital LLC, talks about the outlook for stock and commodity markets. McAlinden also discusses China's decision to raise interest rates, the U.S. dollar and his investment strategy. He talks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Oct. 19 (Bloomberg) -- George Magnus, senior economic adviser at UBS AG, discusses the decision by the People’s Bank of China to raise its benchmark lending and deposit rates for the first time since 2007. The increase in the one-year lending rate to 5.56 percent from 5.31 percent, effective tomorrow, came ahead of data that may show China's inflation accelerated to the fastest pace in almost two years. Magnus speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Oct. 19 (Bloomberg) -- Eswar Prasad, a senior fellow at the Brookings Institution and a professor at Cornell University, talks about China's decision to raise its benchmark lending and deposit rates. China's one-year lending rate will increase to 5.56 percent from 5.31 percent, effective tomorrow, according to the People's Bank of China. Prasad speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Oct. 19 (Bloomberg) -- Brian Marshall, an analyst at Gleacher & Co., discusses Apple Inc.'s fourth-quarter profit reported yesterday and forecast. The maker of Mac computers, iPod music players and iPhone mobile devices said profit rose 70 percent to $4.31 billion, or $4.64 a share, on sales of $20.3 billion. Marshall speaks from San Francisco with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Stocks slid, dragging U.S. benchmark indexes down from five-month highs, as concern grew that banks will have to buy back soured mortgages and Apple Inc.’s profit forecast missed analyst estimates. The dollar rallied and commodities retreated as China raised interest rates.
The Standard & Poor’s 500 Index slid 1.6 percent, the most in two months, to 1,165.9 at 4 p.m. in New York. The Dollar Index gained 1.7 percent for the biggest advance since August. Oil tumbled the most in eight months, losing 4.3 percent to $79.49 a barrel, and copper slid almost 3 percent. Ten-year Treasuries rallied for a second day, sending their yield down three basis points to 2.48 percent.
Technology shares were the biggest drag on the S&P 500 as Apple slumped and International Business Machines Corp. posted a drop in new contracts. Commodity producers fell after China’s central bank raised one-year lending and deposit rates by 25 basis points, spurring concern growth will slow. Banks erased gains as Bloomberg News reported that two investment firms and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase mortgages packaged into bonds.
“Whenever you bring up other speed bumps in the banking sector, it makes people uncomfortable,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. “It brings up all the fear about the financial crisis of 2008,” he said. “China is another factor making people nervous today. It’s almost as important these days to focus on Chinese policies as it is to focus on American policies because of what they mean to the global economy.”
Bank Gains Erased
Financial shares in the S&P 500 lost 1.4 percent collectively. The group rallied earlier after Goldman Sachs Group Inc. reported higher-than-estimated earnings and said the cost of flawed mortgages and new capital rules won’t be significant. Goldman Sachs climbed 2 percent.
Bank of America lost 4.4 percent as people familiar with the matter told Bloomberg News that Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force the bank to repurchase mortgages packed into bonds by Countrywide Financial Corp., the mortgage lender it bought in 2008. Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s.
Technology companies in the S&P 500 lost 1.7 percent as a group. The industry is the biggest among 10 in the S&P 500, accounting for 19 percent of the index’s market value. The group has surged 17 percent since the end of August, leading the S&P 500’s 11 percent rally since then. Apple has climbed 27 percent and IBM has risen 12 percent in the period.
‘Way Too Far’
Apple, the third-biggest company in the world by market value, lost 2.7 percent today as sales of the iPad also trailed some analysts’ estimates. IBM slid 3.4 percent.
“Stocks like Apple and IBM have run way too far, so we’re going to have an earnings season where investors will sell on the news after we’ve been buying the rumor all the way up,” said Tim Hartzell, who oversees $300 million as chief investment officer for Houston-based Sequent Asset Management.
U.S. equities retreated even after a government report today showed builders unexpectedly began work on more homes in September, a sign the real estate market is stabilizing at depressed levels.
‘Concerned Enough’
The U.S. currency strengthened against all 16 major peers, rising more than 1 percent versus 12 peers including the South Korean won, the euro, the Swiss franc and the Australian dollar. The Dollar Index, used by IntercontinentalExchange Inc. to measure the currency against the pound, yen, euro, Swedish krona, Swiss franc and Canadian dollar, climbed to a two-week high.
“People are concerned enough about the Bank of America statement and then if you go back to this morning, the dollar was stronger, China raised an interest rate number and while Goldman beat expectations, they weren’t great numbers,” said Mike Shea, a managing partner and trader at Direct Access Partners LLC in New York. “You add it up and you have a day where a prudent investor is going to take a little bit off the table after what’s been a really nice run.”
Treasury Secretary Timothy F. Geithner said the U.S. will preserve confidence in a strong dollar. The U.S. currency has weakened almost 8 percent against the euro since the end of August amid speculation the Fed will pump more cash into the economy to safeguard the recovery.
“The United States of America and no country around the world can devalue its way to prosperity, to competitiveness,” Geithner said yesterday in a panel discussion in Palo Alto, California. “It is not a viable, feasible strategy and we will not engage in it.”
Default Swaps
A benchmark indicator of corporate credit risk in the U.S. climbed for the fourth time in six days. Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 3.6 basis point to a mid-price of 100.42 basis points at 3:55 p.m. in New York, a two-week high, according to index administrator Markit Group Ltd.
Commodity and technology stocks led declines in the Stoxx Europe 600 Index, with Rio Tinto Group and Total SA losing more than 1.6 percent each. Banks in the index climbed 0.5 percent, with Germany’s Deutsche Bank AG rallying 1.8 percent. The Basel Committee on Banking Supervision said it agreed on details of minimum liquidity requirements for banks in a report to the Group of 20 nations.
SKF, Porsche
SKF AB, the world’s biggest maker of ball bearings, jumped 10 percent as earnings topped estimates. Porsche SE dropped 8.7 percent as Volkswagen AG Chief Executive Officer Martin Winterkorn said the merger of the two companies may have to put on hold until risks from U.S. lawsuits and German tax issues are resolved. German investor confidence fell to a 21-month low in October as weaker global growth and a stronger euro dimmed the export outlook, a report today showed.
The MSCI Emerging Markets Index declined for a third day, losing 1.3 percent, as technology companies including Samsung Electronics Co. and Infosys Technologies Ltd. retreated. The Bloomberg-JPMorgan Asia Dollar Index fell 0.7 percent, heading for the steepest drop since June, after the World Bank lowered its growth forecast for east Asia and urged the region’s policy makers to ward off asset bubbles.
Brazil’s real lost 0.8 percent to 1.6853 per dollar after the nation stepped up efforts to curb gains in its currency by raising inflow taxes and said it may be forced to take additional measures as Finance Minister Guido Mantega called for an end to the worldwide “currency war.”
Real, Pound
Brazil, Latin America’s largest economy, raised the so- called IOF tax on foreigners’ investments in fixed-income securities to 6 percent from 4 percent. It also boosted the levy on money brought into the country to make margin deposits for transactions in the futures market to 6 percent from 0.38 percent. The benchmark Bovespa index slid 2.6 percent, the most since June.
The pound weakened 1.2 percent to $1.5692 before the Bank of England releases minutes tomorrow from its latest meeting, while Chancellor of the Exchequer George Osborne details reductions in government spending plans to tackle the nation’s budget deficit.
German bonds fell, with the yield on the 10-year bund rising three basis points to 2.41 percent. Spain sold 4.18 billion euros ($5.82 billion) of 12-month bills at an average yield of 1.842 percent today, compared with 1.908 percent at the last auction on Sept. 21. It sold 2.22 billion euros of 18-month bills at a yield of 2.009 percent, compared with 2.146 percent in September, the Bank of Spain said.
Greece auctioned 1.17 billion euros of 13-week securities at a yield of 3.75 percent, down from 3.98 percent at a sale on Sept. 21.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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