U.S. Stocks Retreat After GDP Trails Estimates as Treasuries, Euro Advance
Stocks Fall, Commodities Erase Gains
Jin Lee/Bloomberg
Traders work on the floor of the New York Stock Exchange (NYSE) in New York.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York. Photographer: Jin Lee/Bloomberg
Jan. 27 (Bloomberg) -- The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back. Gross domestic product, the value of all goods and services produced, climbed at a 2.8 percent annual pace following a 1.8 percent gain in the prior quarter, Commerce Department figures showed today in Washington. Betty Liu and Sara Eisen report on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Jan. 27 (Bloomberg) -- Komal Sri-Kumar, chief global strategist at Los-Angeles based TCW Group Inc., talks about the U.S. economy, Federal Reserve monetary policy, and financial markets. Sri-Kumar also discusses Europe's sovereign debt crisis. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Jan. 27 (Bloomberg) -- Arnout Van Rijn, chief investment officer for Robeco Groep NV’s Hong Kong division, talks about Asian stocks. He also discusses China's economy and Federal Reserve monetary policy. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Jan. 27 (Bloomberg) -- Paul Hickey, co-founder of Bespoke Investment Group, talks about the prospects for financial stocks and the stock market. He speaks with Betty Liu and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Stocks fell, trimming a fourth straight weekly gain for the Standard & Poor’s 500 Index, and Treasuries gained after the U.S. economy grew less than forecast. The euro increased amid optimism Greece was making progress in debt-restructuring talks with bondholders.
The S&P 500 slipped 0.2 percent to close at 1,316.33 at 4 p.m. in New York, leaving it up less than 0.1 percent for the week. Ten-year Treasury yields fell four basis points. The S&P GSCI Index of commodities added 0.3 percent as gasoline and natural gas increased at least 2.7 percent. The euro increased 0.9 percent to $1.3229, a six-week high, while the Italian 10- year note yield lost 15 basis points to 5.90 percent after borrowing costs declined at a bill auction.
Losses in stocks were triggered by government data showing the U.S. economy grew 2.8 percent last quarter, compared with the 3 percent predicted in a Bloomberg survey of economists and underscoring the Federal Reserve’s decision to keep interest rates low for a longer period.
“Having the world’s economic locomotive showing signs of strain is adding to investors concern worldwide,” Jack Ablin, who helps oversee $55 billion as chief investment officer for Chicago-based Harris Private Bank, said in a telephone interview. “The GDP report creates doubt about how solid the recovery is. It’s a very difficult environment to assess.”
U.S. equities retreated for a second day after the S&P 500 reached the highest level since July and the Dow closed at the highest since May following the Fed’s statement. The S&P 500 is up 4.7 percent in 2012 and has rebounded almost 20 percent from its 2011 low in October amid improving economic data and better- than-forecast earnings. (SPX)
Earnings Season
Earnings have topped estimates at about two-thirds of the 169 companies in the S&P 500 that reported results since Jan. 9, according to data compiled by Bloomberg. The gauge is trading at 12.5 times estimated earnings, compared with last year’s low of 11.2 on Aug. 19.
Ford Motor Co. slipped 4.2 percent today after fourth- quarter profit fell short of analysts’ estimates as overseas operations dragged down results, while a one-time tax gain resulted in the company’s biggest annual profit since 1998.
Starbucks Corp. (SBUX) dropped 1 percent after the world’s largest coffee-shop chain narrowed its forecast for profit excluding certain items to a range of $1.78 to $1.82 a share for fiscal 2012, compared with analysts’ average estimate of $1.83.
Juniper Networks Inc. (JNPR) sank 3 percent as the second-biggest maker of computer-networking equipment forecast sales and profit that missed estimates.
Banks Advance
Banks led a rebound in stocks that briefly turned the S&P 500 higher in the final hour of trading as the White House said it will relax the rules under the Home Affordable Modification Program and triple incentives paid to lenders that reduce mortgage principal. The revised HAMP program would pay Fannie Mae and Freddie Mac to forgive debt on homes that have lost value.
Wells Fargo & Co. and Citigroup Inc. rose at least 1.6 percent to pace an advance in financial shares, which trimmed gains as S&P lowered the credit-rating outlooks for Jefferies Group Inc. and Cantor Fitzgerald LP to “negative” on Europe’s debt crisis will weigh on trading and investment banking. Jefferies fell 2.4 percent, reversing an earlier 1 percent gain.
European Shares
The Stoxx Europe 600 Index decreased 1 percent, wiping out most of yesterday’s rally that sent the regional benchmark into a bull market with a gain of 20 percent from last year’s low.
BNP Paribas SA (BNP), France’s biggest bank, retreated 3.3 percent as JPMorgan Chase & Co. downgraded the shares to “neutral” from “buy.” BP Plc (BP/LN) lost 2.6 percent as a U.S. judge ruled that the U.K. oil company can’t collect losses caused by the 2010 Gulf of Mexico spill from Transocean Ltd.
The Italian two-year note yield declined three basis points to 3.56 percent. Yields fell to 1.969 percent as Italy sold 8 billion euros of 182-day bills, the lowest level since May and down from 3.251 percent at the previous auction on Dec. 28.
“The auction was quite positive,” said You-Na Park, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “The market is waiting for the summit next week and comments from Germany and France.”
The Spanish 10-year bond climbed for the sixth consecutive day, with the yield 24 basis points lower at 4.97 percent.
The yield on the Greek 10-year bond rose 49 basis points to 33.97 percent. Greek Finance Minister Evangelos Venizelos said the government was “one step away” from completing talks on a voluntary debt swap and was negotiating with international creditors on the terms for a second financing package at the same time.
’Tough, Open Issues’
“We are a step away from completing the processes for the PSI and we have to deal with a series of tough, open issues for the new financing program,” Venizelos said in an e-mailed statement from the Athens-based ministry. “All these have to be concluded within the next few days so that the public offer for the PSI occurs before Feb. 15.”
The Institute of International Finance said progress was made in talks in Athens today on the Greek debt swap and that negotiations will continue tomorrow.
After European markets closed, Fitch Ratings cut the credit ratings of Italy, Spain and three other euro-area countries, saying they lack financing flexibility in the face of the regional debt crisis.
Italy, the euro area’s third-largest economy, was cut two levels to A- from A+. The rating on Spain was also lowered two notches, to A from AA-. Ratings on Belgium, Slovenia and Cyprus were also reduced, while Ireland’s rating was maintained.
The MSCI Emerging Markets Index of stocks rose 0.4 percent, capping a 4.4 percent weekly rally.
To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net
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